Forum Archive Index - July 2000

[Brian Gale <brigale@i4free.co.nz>]

> Capital gains
> New Zealand has no capital gains tax regime. However, trading gains
> on equity and other securities are subject to income tax, under the
> Income Tax Act of 1976, if they were purchased for the dominant
> purpose of resale (as part of a profit making scheme) or as
> part of a business of dealing in those
> securities.

This is a quotation from NZSE which I believe makes the difference
between a trader & investor reasonably clear. If queried you would
need to satisfy IRD that your dominant purpose was not resale but to earn
dividends  (which are of course taxable)   IMO a
reasonable level of portfolio adjustment i.e. selling one stock &
buying another, is unlikely to be queried.  You can easily argue
that you needed to change because you didn't think the Company would do
so well in the future !!  Who can challenge you on that ?

 (The highlighting is mine)

There have been earlier postings on this subject which you can find in
the archives.

At 19:54 18-07-00 +1200, you wrote:
>         As
> an investor over the last few years I have watched the value
> of my N.Z. portfolio rise and fall but recently not increase to any
> great extent. (currently up 6% over 2 years-dividends not taken 
> into
> account) There have been occasions (e.g. tel at $9.50 or airvb at
> $3.00)
> when I have considered selling but did not because of the risk of
> being
> classed as a trader and being liable for tax on the capital gain.
> Consequently I have only sold 1 or 2 lots of shares.
>         I have now started trading
> under a separate a/c and expect to
> pay tax when profits are realized (or visa versa) and I  have kept
> my
> investment shares separate.
>         My question is:
>                                
> Would it be better to have all shares
> tradable (whether one does or not) i.e. Being able to sell when a
> good
> capital gain is made and prospects for more is limited, pay the tax,
> and
> reinvest in a share with better growth prospects?
>
>            
> or,
>                                
> Keep the investment shares separate, pay
> no tax, watch them rise and fall and trust that eventually that 
> ones
> picks will increase in value long-term?
>
>         I would be interested to hear
> any opinions.
>
> Grant.
>
>
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