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Thread: Tax advice

  1. #41
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    from earlier in the bread -

    To judge whether a person is undertaking a business, one needs to look at the number of transactions entered into and the holding period before the shares were sold. There would need to be evidence that the pattern of buying and selling was continuous, perhaps over a number of years. The business need not be profitable, but there would need to be evidence that the taxpayer treated their share buying and selling as a business. Dealers usually:


    Invest a substantial amount of capital into the market and will sometimes borrow to fund their purchases

    Monitor their portfolios regularly perhaps weekly or even daily; they may have a trading system of some kind.

    They will usually spend a good deal of time researching their investments

    They may be trading low value high risk shares to gain leverage.
    Brilliant - I feel that that has more meaning than 'intent'
    At the top of every bubble, everyone is convinced it's not yet a bubble.

  2. #42
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    Heres one earlier thread re being classed a trader or investor. There is at least one other. thread with more in it.

  3. #43
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    A friend of mine asked me if you have to pay extra tax on dividends on top of the imputation credits already paid. I said, I don't know, but will ask sharetrader, where there is a lot of knowledgeable people. Anyone know about tax on dividends? Thanks sw.

  4. #44
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    Quote Originally Posted by see weed View Post
    A friend of mine asked me if you have to pay extra tax on dividends on top of the imputation credits already paid. I said, I don't know, but will ask sharetrader, where there is a lot of knowledgeable people. Anyone know about tax on dividends? Thanks sw.
    All NZ dividends have 33% deducted from them. This is made up of the imputation credit and the withholding tax. If your marginal tax rate is less than 33% then you would get a refund. If not then you have fully paid your tax.

    Foreign dividends have anywhere between 0 and something more deducted and you then would have to pay at what ever marginal rate you we are on. This is done in the foreign income section of the tax return, not the dividend section. A credit for overseas tax paid can also be claimed depending on the source of the dividend.

  5. #45
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    Quote Originally Posted by 777 View Post
    All NZ dividends have 33% deducted from them. This is made up of the imputation credit and the withholding tax. If your marginal tax rate is less than 33% then you would get a refund. If not then you have fully paid your tax.

    Foreign dividends have anywhere between 0 and something more deducted and you then would have to pay at what ever marginal rate you we are on. This is done in the foreign income section of the tax return, not the dividend section. A credit for overseas tax paid can also be claimed depending on the source of the dividend.
    Thanks 777, will pass it on.

  6. #46
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    So at the end of the road - when you are an aged couple like us - I'm just on eighty, isn't it fair enough to play with the few dollars you saved in shares to make the time more enjoyable. I've paid the piper, over and over. I trade to pay for our next holiday, or my wife's hearing aids or the like. sometimes the taxman gives me a rebate on dividends.

  7. #47
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    Quote Originally Posted by Beagle View Post
    This is the best summary of the situation. It should be noted however that the mere separation out of activities that are stated to be trading, (perhaps through a different broker) and those that are claimed to be investing in and of itself will not be considered to be a definitive sole measure of intention even if done so through separate legal entities, (for example by conducting trading through a company or trading trust). The argument that you can effectively and definitively separate trading and investing activities because they're traded through different accounts and brokers doesn't hold water of itself in as much as the fact that one's intention needs to be evidenced by one's investment behaviour, (actions speak louder than words as far as the IRD are concerned).

    Further, even separating trading activities into a separate company doesn't disassociate you from your other trading by virtue of the associated person's test in the Income tax Act.

    Put simply, while separating out activities is a good idea for active traders, your investing through your investment account will still be objectively measured if push comes to shove by the IRD based on the evidence of your investing patterns more than anything else not which account you invested through and if you buy and sell shares on a pretty regular basis in your investment account which you claimed were bought with the intention of being long term investments, the fact that you're trading through a separate account for really quick trades won't help you much, in fact it could be argued the IRD will use that against you and either by association, (associated persons test) or direct link between claimed left and right hand of the same individual, they could easily make the case that ostensibly all your activities are trading.

    Its a murky area of the law and people would be well advised to take advice for their particular circumstances from a good quality accountant or tax lawyer with expertise in this area if they have concerns but in general if you are going to separate out your activities make sure your long term investing activities really are just that and when in doubt whether you'll be investing long term or not put it through your trading account so you don't taint your true investments.

    In terms of what constitutes long term investment investors might want to consider the Government's moves in respect of the brightline test regarding property transactions. Anything sold within 2 years is automatically considered to be on trading account. This shouldn't be interpreted to mean that investors holding shares for longer than two years and one day are automatically exempt from trading, most especially so if they invested in growth companies that don't pay dividends

    http://www.interest.co.nz/opinion/78...and-parliament

    I have just had my tax return done for 16/17 (its a long story) and really cant challenge , change anything at this late stage but i have found out a few more things.
    Your info is correct Roger. Despite separating my trading and Investing portfolios out to diff brokers , many of my investment stocks have been treated like trading stocks UNLESS they are over 2 years old (the bright line prop test above) so i got a shock to see that instead of getting a tax return this year i have a lot more tax to stump up with. The other thing of note was also what my intention was when SELLING a stock!!!?. This could also decide what status that share was under. On top of all that my accountants want nearly double the fee from last year. Havnt had a chance to add up all my transactions but so far it doesn't look a lot different.

    Am thinking of switching accountants but will that create more problems /costs with them having to set up a new "template" so to speak and does my history get transferred to new accountant etc, can they be difficult about this etc. Thoughts appreciated.

  8. #48
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    Quote Originally Posted by 777 View Post
    All NZ dividends have 33% deducted from them.
    Unless they are PIES.

  9. #49
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    Quote Originally Posted by Joshuatree View Post
    I have just had my tax return done for 16/17 (its a long story) and really cant challenge , change anything at this late stage but i have found out a few more things.
    Your info is correct Roger. Despite separating my trading and Investing portfolios out to diff brokers , many of my investment stocks have been treated like trading stocks UNLESS they are over 2 years old (the bright line prop test above) so i got a shock to see that instead of getting a tax return this year i have a lot more tax to stump up with. The other thing of note was also what my intention was when SELLING a stock!!!?. This could also decide what status that share was under. On top of all that my accountants want nearly double the fee from last year. Havnt had a chance to add up all my transactions but so far it doesn't look a lot different.

    Am thinking of switching accountants but will that create more problems /costs with them having to set up a new "template" so to speak and does my history get transferred to new accountant etc, can they be difficult about this etc. Thoughts appreciated.
    What im hearing is there are a number of ways accountants process things and treat ones share activities.Some are way more hardline then others when interpreting the gray areas.

  10. #50
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    Quote Originally Posted by fungus pudding View Post
    Unless they are PIES.
    True but you don't have to declare those.

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