Income tax on trading

[SBQ]

Thanks unhuman (and the other two). I don't think I've left out any relevant facts. But if you think there is something that could change this position please ask me and I'll endeavour to answer. As you can probably see I've been giving this a lot of thought. But I'm not a tax person and I don't know what I don't know. Thanks in advance.

We need to question residency as both Australia and NZ base taxation on a world wide basis. You say she is NZ resident, but is she also an Autralian resident (or has been in the past?) ; I ask because you mentioned she has a "Australian Bank Account" and the lack of having direct access to it from NZ? may mean her Australian equities are held abroad in Australia? By ASB broker there?

1) While she may of owned the Australian equities from a lengthy amount of time, it's clear there was no intent for profiting / speculation from the NZ tax perspective. However, you can be sure the Australian ASB bank end will report to the Aus tax dept upon sale of the equities and if the investment account / portfolio is registered in Australia with an Aus tax #, then there will be a tax obligation to pay at the Australian end. If the account was registered as a non-resident account with no tax # held, then there should be no concern at the Australian end.

2) At the NZ end, if she has been a NZ resident for the 40 years ; the purchase of those assets would not fall into NZ taxation for the bulk of the years invested. However, they should / could of been subjected to NZ's FIF (Foreign Investment Fund) tax rules. There's a web link (perhaps on IRD) that shows which Australian equities are listed as exempt from FIF (but not all). If they're exempt, then there's no issue of capital gains tax at the NZ end nor FIF.

FIF was introduced in 2007 so well over 10 years and if the equities are not listed as being exempted from FIF, then she should be filing annual tax returns to IRD on those assets (any gains have a tax max of 5% if the FDR is used). How long did she live in NZ or become a NZ resident?

3) Assuming she was an Australian resident in the past, i'm certain Australia has deemed disposition rules upon leaving (becoming non-resident) Australia. This means capital gains tax to be paid on the investments (does not have to be sold) based on the date when she departed Australia. Upon becoming resident in NZ, if she arrived during the time FIF had been implemented, then her broker/account portfolio should be assessed under FIF (if the shares are not exempted from FIF).

A lot has happened in the past year regarding AML and more specifically, CRS (common reporting standard). No more are banks in the some 110+ countries (mostly OECD nations) around the world can have bank secrecy like they use to and in order to comply, they must forward tax information to the resident country. If you're wondering how CRS came about, you can blame the Panama papers and the media on it ; also the US was the 1st nation to impose such an act globally called FACTA on US citizens living abroad.

From my tax knowledge back in Canada, it is very hard to tell the tax dept that you're buying shares WITHOUT the intent for a profit. The meaning is 'investment income' by all means, if there's a gain on the sale of the share will always attract a tax to pay because the intent is clear... no one buys shares without the intent not to profit. This is treated very different to buying a principal resident home which a person uses and dwells in and any capital gain upon the sale is genearlly.. tax free. Houses are a necessity but owning investments... particularly share ownership, is treated in a way like business income in a partnership of a small business; at least from the Cdn perspective.