Tax on Capital Gains: Trading vs Buy-and-hold

[percy]

A similar situation to the above. I have a small loss from Forex trading, plus a few expenses related to setting up, 2nd hand computer, membership fess etc... for the 2010. Has anyone returned a forex loss before, and what is the likely IRD reaction?

Also I have been studying taxation as part of my diploma, and have come across the very grey area of share trading in relation to assessable income. Does anyone have any experience or know just what level of activity the IRD goes from it being 'not business' to being 'business'. Obviously buying and selling one or two shares a year won't interest them, but what about 10, or 20? Bearing in mind that I am talking from the viewpoint of a person who works full-time and does a bit of share-trading in their spare time. I know that if a persons full-time activity is share-trading then it is a business - it is when a persons full time income activity is something else (Say a Job) that things get tricky.

Cheers
Razor

I would think if you claim losses and expenses then you will have to share profits with them.
Only buying a few shares a year,with the view of starting your on savings plan I would think you are in the clear.
Being awere of the problems of tax as a trader,may make us all a little bit more selective of the shares we buy.
A friend of mine has a business,and any shares he buys to trade he buys in the business's name,while the long term holds he buys in his own name.

[CJ]

I think shares and forex is different as forex is a financial arrangement. Any gain/loss would be taxable irrespective of whether you are a trader. You would need to be a trader to claim expenses though.

[COLIN]

A similar situation to the above. I have a small loss from Forex trading, plus a few expenses related to setting up, 2nd hand computer, membership fess etc... for the 2010. Has anyone returned a forex loss before, and what is the likely IRD reaction?

Also I have been studying taxation as part of my diploma, and have come across the very grey area of share trading in relation to assessable income. Does anyone have any experience or know just what level of activity the IRD goes from it being 'not business' to being 'business'. Obviously buying and selling one or two shares a year won't interest them, but what about 10, or 20? Bearing in mind that I am talking from the viewpoint of a person who works full-time and does a bit of share-trading in their spare time. I know that if a persons full-time activity is share-trading then it is a business - it is when a persons full time income activity is something else (Say a Job) that things get tricky.

Cheers
Razor

In respect of shares: its all a matter of "Intention" when you purchased the shares, i.e. "did you INTEND to sell them for a capital gain. But Intention is very hard to prove, as the IRD readily admit.
Scout around the forum, Razor, and you will find that plenty has been posted at various times on this subject. It was interesting to note that, in preparing this year's Budget, Treasury had strongly advocated bringing in a "5-year rule", i.e. unless you held the shares for 5 years you would be taxed on any capital gain on sale. Thankfully the Government didn't go along with the idea. "Brightlining" was the description Treasury used - I can't for the life of me figure out why that term, but it is probably blindingly obvious to some.

[Voltaire]

In respect of shares: its all a matter of "Intention" when you purchased the shares, i.e. "did you INTEND to sell them for a capital gain. But Intention is very hard to prove, as the IRD readily admit.
Scout around the forum, Razor, and you will find that plenty has been posted at various times on this subject. It was interesting to note that, in preparing this year's Budget, Treasury had strongly advocated bringing in a "5-year rule", i.e. unless you held the shares for 5 years you would be taxed on any capital gain on sale. Thankfully the Government didn't go along with the idea. "Brightlining" was the description Treasury used - I can't for the life of me figure out why that term, but it is probably blindingly obvious to some.

You've pretty much answered your own question Colin: "Brightlining" because in contrast to the vague and murky "intention" test, a 5-year-holding test would provide a sharp division (or brightline) between investing and trading.

[Phaedrus]

Anyone silly enough to delay 3 to 6 months before acting on TA Buy or Sell signals deserves a special punitive tax penalty!

[Phaedrus]

No Belg! No No NO! The market NEEDS people like you. Who else would we sell our down-trending stocks to?

[gonnfishing]

Hi Guys

Like many, I primarily invest on the asx in a mixture of small/med cap's mainly resource stocks.

I am not sure on the tax implications of what I am doing, I usually buy and hold, but do fiddle around the edges skim a few off when in need of cash or find another stock I'm interested in. Most of these not are in the ASX 200.

Am I liable to pay tax in NZ on unrealised capital gains on ASX small caps each year irrespective of weather I am a trader or longer term investor?

When I do sell a few shares for a holiday for example am I liable to pay tax if I made a profit on those shares?

Any info would be greatly appreciated

[fungus pudding]

Hi Guys

Like many, I primarily invest on the asx in a mixture of small/med cap's mainly resource stocks.

I am not sure on the tax implications of what I am doing, I usually buy and hold, but do fiddle around the edges skim a few off when in need of cash or find another stock I'm interested in. Most of these not are in the ASX 200.

Am I liable to pay tax in NZ on unrealised capital gains on ASX small caps each year irrespective of weather I am a trader or longer term investor?

When I do sell a few shares for a holiday for example am I liable to pay tax if I made a profit on those shares?

Any info would be greatly appreciated

You sure as hell are if you tell the taxman you sold them to pay for a holiday! That is income. I don't know the technicalities of sharetrading, but I do know the advantages of being 'inventive".

[gonnfishing]

So by the same logic if I sold at a loss to pay for a holiday I can claim a tax refund?

Is there a thread here that explains asx junior investing and the tax implications clearly?

[shasta]

So by the same logic if I sold at a loss to pay for a holiday I can claim a tax refund?

Is there a thread here that explains asx junior investing and the tax implications clearly?

If you are actively trading stocks, then yes any losses incurred can be claimed. If you are investing as an individual you only need to worry about actual cash transactions, for realised gains/losses, you do not need to worry about unrealised positions until you sell.

If you have a specific question - use this thread