Currency Gains/Loss treatment for Share traders

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06-07-2020, 08:42 AM
Checkmate

Currency Gains/Loss treatment for Share traders

Hi all,
If there are any tax experts in here i would appreciate some tips.

I have been trading US and NZ shares for the last couple of years, and i have worked out all my gains and losses from my US account and my NZ account on a spreadsheet in excel.
I have used the IRD monthly averages for translating the US trades into NZ dollars. This has all been done sufficiently.

The question i have is about the money i have transferred into my US trading account which i used to purchase and sell shares etc -

Do i need to work out if there was any gains or losses from the money that has been exchanged into US dollars and then back into NZ dollars?

I can give an example of what i'm trying to ask here as it may sound confusing: Say i transferred NZD $10,000 into USD $6,500 when the exchange rate was .65 then i do some trading with this money and just for simplicity's sake i do not make any actual gains or loss from trading, but the exchange rate has dropped to .60 and i decide i want to move the USD $6500 back to NZD and now its worth NZD $10,833.33 there is a gain of $833.33 there just from a change in rates... Do i need to pay tax on this $833.33 gain because i was actively trading shares even though this gain was incidental to trading those US shares?

Bear in mind i still translate the US share trades into NZD using the IRD's exchange rates to account for the trade gains/losses for when i file my IR3.

I'd be very appreciative if someone knows what to do here, i have an accounting degree but i can't find any information anywhere on this sort of stuff so i have been working it out with help from various people (including other accountants and professional investors/traders). I'm just not looking forward to going through my transactions to work out any gains or losses from currency exchanges lol.
06-07-2020, 10:16 AM
Jay

You could put the question to IRD themselves - can do it without naming names I think
Can't remember if it was someone on here or an accountant once told me that not unless your Fx has over a certain amount - quite high may have been $100K or more??? before you have to worry about 'declaring" transfers of "cash" transactions only. As you say you change all your trades back to NZD, the same as I do with any ASX trades, the profit/loss converted to NZD.

May be different if trading under a company structure
06-07-2020, 10:34 AM
Checkmate

Quote:

Originally Posted by Jay

You could put the question to IRD themselves - can do it without naming names I think
Can't remember if it was someone on here or an accountant once told me that not unless your Fx has over a certain amount - quite high may have been $100K or more??? before you have to worry about 'declaring" transfers of "cash" transactions only. As you say you change all your trades back to NZD, the same as I do with any ASX trades, the profit/loss converted to NZD.

May be different if trading under a company structure

Thanks Jay,
Yeah I might send a secure mail to IRD and just double check. I just want to make sure i'm handling my trading correctly.

Cheers.
06-07-2020, 10:57 AM
SBQ

Quote:

Originally Posted by Checkmate

Hi all,
If there are any tax experts in here i would appreciate some tips.

I have been trading US and NZ shares for the last couple of years, and i have worked out all my gains and losses from my US account and my NZ account on a spreadsheet in excel.
I have used the IRD monthly averages for translating the US trades into NZ dollars. This has all been done sufficiently.

The question i have is about the money i have transferred into my US trading account which i used to purchase and sell shares etc -

Do i need to work out if there was any gains or losses from the money that has been exchanged into US dollars and then back into NZ dollars?

I can give an example of what i'm trying to ask here as it may sound confusing: Say i transferred NZD $10,000 into USD $6,500 when the exchange rate was .65 then i do some trading with this money and just for simplicity's sake i do not make any actual gains or loss from trading, but the exchange rate has dropped to .60 and i decide i want to move the USD $6500 back to NZD and now its worth NZD $10,833.33 there is a gain of $833.33 there just from a change in rates... Do i need to pay tax on this $833.33 gain because i was actively trading shares even though this gain was incidental to trading those US shares?

Bear in mind i still translate the US share trades into NZD using the IRD's exchange rates to account for the trade gains/losses for when i file my IR3.

I'd be very appreciative if someone knows what to do here, i have an accounting degree but i can't find any information anywhere on this sort of stuff so i have been working it out with help from various people (including other accountants and professional investors/traders). I'm just not looking forward to going through my transactions to work out any gains or losses from currency exchanges lol.

Short answer is no tax on exchange rate. In fact, if you can prove there was NO intention to profit on the US investments, you would have no tax whatsoever to pay as you're well under the $50K NZD threshold before FIF kicks in. Keep in mind, foreign dividends are still taxable.

If i'm not mistaken, the exchange rate is factored at the end when you have declared a profit. That is any differences in gain or loss, you would factor that into the final calculation for the tax year if you had a gain or a profit. No one makes trades without factoring exchange rate loss or gain so from IRD's point of view, they only want to know the end amount of the total in NZD.
06-07-2020, 02:55 PM
Checkmate

Quote:

Originally Posted by SBQ

Short answer is no tax on exchange rate. In fact, if you can prove there was NO intention to profit on the US investments, you would have no tax whatsoever to pay as you're well under the $50K NZD threshold before FIF kicks in. Keep in mind, foreign dividends are still taxable.

If i'm not mistaken, the exchange rate is factored at the end when you have declared a profit. That is any differences in gain or loss, you would factor that into the final calculation for the tax year if you had a gain or a profit. No one makes trades without factoring exchange rate loss or gain so from IRD's point of view, they only want to know the end amount of the total in NZD.

Thanks mate, appreciate the response.
06-07-2020, 05:10 PM
Checkmate

Quote:

Originally Posted by SBQ

Short answer is no tax on exchange rate. In fact, if you can prove there was NO intention to profit on the US investments, you would have no tax whatsoever to pay as you're well under the $50K NZD threshold before FIF kicks in. Keep in mind, foreign dividends are still taxable. 
 
If i'm not mistaken, the exchange rate is factored at the end when you have declared a profit. That is any differences in gain or loss, you would factor that into the final calculation for the tax year if you had a gain or a profit. No one makes trades without factoring exchange rate loss or gain so from IRD's point of view, they only want to know the end amount of the total in NZD.

 
 Thanks mate, appreciate the response.