I’ve done a bit of research but can’t find any definitive information on whether I have to pay capital gains tax or can offset a capital loss against my end of year income.

For example, a bond is issued for 10 years at 8% interest. Issue price of the bond is $100.

Say I buy the bond at a price above or below $100 on the NZDX open market in year 7. For example I buy the bond for $95. I hold this bond until maturity at year 10. I get my interest payments for those 3 years (which I pay tax on at the end of the financial year) and I get $100 back.

I’ve therefore made a $5 capital gain on the $95 bond I purchased.

Do I have to pay tax on this $5 capital gain? Similar if I buy the bond for $105 and make a $5 capital loss, can I offset this capital loss against my income? Does this differ if I sell it before maturity?

I’ve looked in my most recent IR3 return and there is no section which states any capital gains or losses on investments, it only has sections for income such as wages, dividends, overseas income, fixed interest income, property, business income etc.

So all up, three questions… Do I pay tax/offset losses? How do I show this in my tax return? Does it make a different if I hold to maturity or sell before maturity?