Tax Question

[ttw100]

I have a tax question I would appreciate some feedback on.

My question relates to seperating ones short-term trading for capital gain (i.e. capital gain taxable activity) from ones long-term investing for income (i.e. non-capital gain taxable activity). I have only embarked on the latter but now want to try the former using CFDs and a small amount of capital. I was thinking of using a company I control for the short-term trading and leaving the longer-term investments in my wife's name. However, it seems that this might not be sufficient to prevent us being liable for capital gains tax on the long-term investing, particuarly in light of the new associated persons tax legislation going through parliament currently.

I find the the lack of clarity in this area very frustrating. I am quite happy to pay CGT on my trading, but I don't see why this should taint my long-term investments if they would otherwise have been seen as not being subject to CGT. Given the use of different service providers (CFD vs broker) and different structures (personal versus company) I would have thought the distinction between activities was very clear but I know wonder if this is not the case.

Any comments from those more expereinced than myself would be much appreciated!

Cheers,

TTW100

[fungus pudding]

I have a tax question I would appreciate some feedback on.

My question relates to seperating ones short-term trading for capital gain (i.e. capital gain taxable activity) from ones long-term investing for income (i.e. non-capital gain taxable activity). I have only embarked on the latter but now want to try the former using CFDs and a small amount of capital. I was thinking of using a company I control for the short-term trading and leaving the longer-term investments in my wife's name. However, it seems that this might not be sufficient to prevent us being liable for capital gains tax on the long-term investing, particuarly in light of the new associated persons tax legislation going through parliament currently.

I find the the lack of clarity in this area very frustrating. I am quite happy to pay CGT on my trading, but I don't see why this should taint my long-term investments if they would otherwise have been seen as not being subject to CGT. Given the use of different service providers (CFD vs broker) and different structures (personal versus company) I would have thought the distinction between activities was very clear but I know wonder if this is not the case.

Any comments from those more expereinced than myself would be much appreciated!

Cheers,

TTW100

Pedantic perhaps, but we do not impose a tax on capital gains in New Zealand. There is no such thing. However some activities attract income tax. It's hard to give a blanket rule; for instance if you have no other income then you are a sitting duck every time you trade. If however you maintain a large portfolio and occasionally sell to replace with another stock (rebalance) you'll get a fair bit of leeway. But really you're asking 'how long a piece of string is'. Get professional advice, and don't be scared to ask the IRD - just phone and don't identify yourself. They're usually quite helpful and while you won't get a decisive answer, you'll get some idea of the criteria they look for.

[CJ]

As stated there is no CGT in NZ. When you trade, the gains/losses are treated as income.

Unlike land, there is no tainting. All you need to do is clearly show what the intention is with each portfolio. On the basis your CFD provider is separate to your normal broker, this should be easy.

[shasta]

I have a tax question I would appreciate some feedback on.

My question relates to seperating ones short-term trading for capital gain (i.e. capital gain taxable activity) from ones long-term investing for income (i.e. non-capital gain taxable activity). I have only embarked on the latter but now want to try the former using CFDs and a small amount of capital. I was thinking of using a company I control for the short-term trading and leaving the longer-term investments in my wife's name. However, it seems that this might not be sufficient to prevent us being liable for capital gains tax on the long-term investing, particuarly in light of the new associated persons tax legislation going through parliament currently.

I find the the lack of clarity in this area very frustrating. I am quite happy to pay CGT on my trading, but I don't see why this should taint my long-term investments if they would otherwise have been seen as not being subject to CGT. Given the use of different service providers (CFD vs broker) and different structures (personal versus company) I would have thought the distinction between activities was very clear but I know wonder if this is not the case.

Any comments from those more expereinced than myself would be much appreciated!

Cheers,

TTW100

Check the newbie area for previous tax/company related questions.

http://www.sharetrader.co.nz/showthread.php?t=6758

I've answered a few in there

[adventi]

In the newbie area shasta says -- From the 1st April document everythign you do in a spreadsheet

Has anyone got a sharetader spreadsheet template that can be used to start from?

[shasta]

In the newbie area shasta says -- From the 1st April document everythign you do in a spreadsheet

Has anyone got a sharetader spreadsheet template that can be used to start from?

You won't need a template to copy off, basically the paper/email contracts your broker sends you contains all the information you will need, ie.

Date, who you bought/sold, price, FX rate (if non NZ), brokerage

You can insert a column for Interest/Dividends rec'd, imputation credits, bonus shares, dividend reinvestment programs etc

I mentioned doing this as you go, as it's far easier than waiting until year end & trying to find all the paperwork!

[newbietrader]

I'm a newbie here. Thanks for your input.
I'm not a trader and I work full time, usually hold for at least 2 or 3 months or more, depending on the news or switching my share portfolio.

With regards to share transaction, is it compulsory to declare the transaction of profit/loss in our yearly tax form ?

[shasta]

I'm a newbie here. Thanks for your input.
I'm not a trader and I work full time, usually hold for at least 2 or 3 months or more, depending on the news or switching my share portfolio.

With regards to share transaction, is it compulsory to declare the transaction of profit/loss in our yearly tax form ?

If you're buy & selling shares with the intention of making a profit, then yes you should be declaring it in your IR3 tax return.

There is a large grey area surrounding all this, but i think its better to fess up & ensure you claim all expenses, than wonder if/when the IRD comes knocking.

By the way the best traders on Sharetrader largely do it for a living, it really does take alot of dedication & discipline to "trade" profitably, & not trying to put you off, but if you have limited capital or depend on the income it provides, then trading may not be for you.

I'm not a trader as such, but do from time to time take a short term punt

There are plenty on here who do just nicely with a "buy & hold" strategy.

Key is to find the style that suits your personality & risk tolerance & stick to your system.

[fungus pudding]

I'm a newbie here. Thanks for your input.
I'm not a trader and I work full time, usually hold for at least 2 or 3 months or more ...........

Oh yes you are a trader.

[newbietrader]

thx shasta for yr input.

So any profit you gain in a transaction is taxable. Is this called capital gain tax?

If one hold a share more than 1 or 2 years then decided to sell with some gain, should one declare the profit in tax return and be taxed? or need not declare it as this was a long term holding?
Still back to the main question does one need to declare the profit/loss of the transaction in tax return whether it's a short or long term holding?

cheers