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What can you tell me about capital gains tax in NZ?

Thursday 24th January 2002

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Q: I just wanted to find out more about the capital gains tax in NZ. I buy and sell shares as a hobby, not frequently or as a full-time thing. How would capital gains work?

A: I can only give you a general guideline of the IRD's treatment of capital gains and you should talk to a tax specialist for your specific needs but in general these rules apply.

Once a trader always a trader! Trading is considered a business. If you are trading (even if you already have a job) you can claim back any brokerage fees paid and you can claim losses if you didn't make any money but you also have to pay capital gains tax on any profits. If you file a return as a trader the IRD will assume you are a trader for tax purposes for the rest of your life. If you want to trade it is advisable to set up a separate limited liability company to trade through.

If you are an individual then unless the IRD audits you or you tell them that you trade shares they are unlikely to pursue you for capital gains tax. If you are not trading frequently and the profits you make on your shares is not your main source of income then you are unlikely to be classed as a trader by the IRD.

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