Tax Question

[fungus pudding]

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

NZ does not have capital gains tax. Profits made in this way may be subject to income tax though. Whether it represents a large % of your income (you're definitely making taxable money if living off trading) whether vyou are reinvesting profits into the market, or another investment class, or going on a world trip - and several other factors, not least of which is what you wish to tell them! Professional advice is the answer.

[newbietrader]

thnks for yr input fun..

I have a job, making it as my primary source of main income..and my share transactions have so far been no more than 5 in every year and the % gain earned (after minus losses) has been small, not even qualify as main source of income.

[fungus pudding]

thnks for yr input fun..

I have a job, making it as my primary source of main income..and my share transactions have so far been no more than 5 in every year and the % gain earned (after minus losses) has been small, not even qualify as main source of income.

So frequency of trading starts to form a pattern, your intention at time of purchase comes into it.
If you bought with intention of holding - but then unforeseen need to sell arises, might eliminate tax. (you can be too honest). So professional advice, write down your intention every time you buy and sell, forget about a few things, use your imagination (AKA lying) But it is like asking how long is a piece of string; except string can be measured, but taxable income from investments? No two answers will ever be the same, including answers from IRD.

[shasta]

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

You first need to decide, do you really want to "trade", or "invest".

As a rough guide, buying & selling into the same stock will constitute trading. (Australia has a 50% deduction in CGT for stocks held over a year). Thats a good guide to use.

Trading gains = taxable income (it's not CGT as such, but sort of)

Investment gains are not taxable, but dividends/bonus shares are

If you haven't got a grasp of charts (ie Technical Analysis), then trading may not be for you.

What i would urge you to do is write down a list of criteria, that will form "your system". (The best systems will incorporate both technical & fundmental analysis, or TA & FA)

Instead of confusing yourself, write it down & stick to it - that removes the emotion out of your decisions.

Questions you need to ask yourself before making a decision...

* Why am i buying this stock?
* Why am i selling this stock?
* What is my risk tolerance? (setting stop losses for example)
* What is my exit strategy?

The answers to these will differ depending on whether you're trading or investing.

The key is identifying & deciding on what sector/company to buy in the first place, & make sure it fills within your criteria for selection.

[Steve]

Life would be so much easier if all gains were taxed irrespective of intention!

(and any corresponding losses deductible for fairness)

[shasta]

Life would be so much easier if all gains were taxed irrespective of intention!

(and any corresponding losses deductible for fairness)

Thats easy its called "trading"

[fungus pudding]

Life would be so much easier if all gains were taxed irrespective of intention!

(and any corresponding losses deductible for fairness)

So a long term holder sells after 20 years. If he has made a 'gain' it is very likely a nominal one because of the eroded dollar value. That then becomes a tax on inflation, which was not the result of investors' actions.

[Steve]

So a long term holder sells after 20 years. If he has made a 'gain' it is very likely a nominal one because of the eroded dollar value. That then becomes a tax on inflation, which was not the result of investors' actions.

Why not? I am not aware of any countries with a CGT that allow an inflation adjustment.

Studies have shown that countries with a CGT levelling the 'investment' playing field are better off as it takes away the investment distortion of a preference 'non-productive' investment such as residential property in the expectation of a tax-free gain over more 'productive' investments.

[fungus pudding]

Why not? I am not aware of any countries with a CGT that allow an inflation adjustment.

Studies have shown that countries with a CGT levelling the 'investment' playing field are better off as it takes away the investment distortion of a preference 'non-productive' investment such as residential property in the expectation of a tax-free gain over more 'productive' investments.

Studies have also shown theat CGT dammages an economy as it stops things happening or slows economic activity.
Depends which studies you want to believe. NZ has got it right in my view, at least in theory, by applying income tax to habitual traders. In practice the IRD has been pretty slack in applying the rules.

[fungus pudding]

Studies have also shown theat CGT dammages an economy as it stops things happening or slows economic activity.
Depends which studies you want to believe. NZ has got it right in my view, at least in theory, by applying income tax to habitual traders. In practice the IRD has been pretty slack in applying the rules.

P.S. IO should have added that real estate has no special treatment over any other investments such as shares, in spite of commonly held beliefs.