This is the best summary of the situation. It should be noted however that the mere separation out of activities that are stated to be trading, (perhaps through a different broker) and those that are claimed to be investing in and of itself will not be considered to be a definitive sole measure of intention even if done so through separate legal entities, (for example by conducting trading through a company or trading trust). The argument that you can effectively and definitively separate trading and investing activities because they're traded through different accounts and brokers doesn't hold water of itself in as much as the fact that one's intention needs to be evidenced by one's investment behaviour, (actions speak louder than words as far as the IRD are concerned).
Further, even separating trading activities into a separate company doesn't disassociate you from your other trading by virtue of the associated person's test in the Income tax Act.
Put simply, while separating out activities is a good idea for active traders, your investing through your investment account will still be objectively measured if push comes to shove by the IRD
based on the evidence of your investing patterns more than anything else not which account you invested through and if you buy and sell shares on a pretty regular basis in your investment account which you claimed were bought with the intention of being long term investments, the fact that you're trading through a separate account for really quick trades won't help you much, in fact it could be argued the IRD will use that against you and either by association, (associated persons test) or direct link between claimed left and right hand of the same individual, they could easily make the case that ostensibly all your activities are trading.
Its a murky area of the law and people would be well advised to take advice for their particular circumstances from a good quality accountant or tax lawyer with expertise in this area if they have concerns but in general if you are going to separate out your activities make sure your long term investing activities really are just that and when in doubt whether you'll be investing long term or not put it through your trading account so you don't taint your true investments.
In terms of what constitutes long term investment investors might want to consider the Government's moves in respect of the brightline test regarding property transactions. Anything sold within 2 years is automatically considered to be on trading account. This shouldn't be interpreted to mean that investors holding shares for longer than two years and one day are automatically exempt from trading, most especially so if they invested in growth companies that don't pay dividends
http://www.interest.co.nz/opinion/78...and-parliament