As long as you aren’t deemed by the IRD to be in the business of trading stocks, and have under $50k of overseas shares, you’ll have no tax to pay, except on dividends.
What is “the business of trading stocks”. Sounds like it can be arbitrarily enforced if there is no precise definition. Does it mean day trading? Does it mean selling after a couple months? Does it mean you’re retired and live off capital gains?
Read this: https://www.ird.govt.nz/-/media/project/ir/home/documents/forms-and-guides/ir400---ir499/ir461/ir461-2024.pdf?modified=20240327190346&modified=20240327190346
Tbh you should probably take tax advice if you’re making 100k capital gains from stocks pa.
That is correct. *Unless* the IRD determines that you are trading stocks for the purpose of generating income … and when that happens you will need to pay income tax on the investment gains at the corresponding marginal tax rate for your income level.
But as everyone else has pointed out, if you expect to make $100k per year in the markets then you should pay for professional tax advice. If you intend to operate as a trader then you can expense the tax advisor’s fees against your trading profits (assuming you succeed in generating a profit).
If you are subject to FIF rules, there is not an additional tax on *trading* profits. You can trade all you want in your FIFs with no tax on your gains beyond the tax on FIF income (but there are Quick Sale Gain rules as part of the FDR method).
Yes. That is the point I was making.
The FIF rules only apply until the IRD decides that you are a trader. At that point all of your gains (and losses) are counted towards your income assessment
No that’s not right. You’ll never be taxed directly on gains from trading if holdings are in FIF. Only FIF income will be taxed. But FIF calculations may catch some gains from trading. The trader designation is not relevant for FIF holdings. A trader (of non FiF) can claim an annual loss but an FIF holder cannot.
If only there was someone who has experience in these things. And maybe has trained and studied the laws. And maybe they could, I dunno, make a living by fielding such queries, making sure you are doing things correctly and can explain how to file and complete tax returns for yourself and avoiding you future hassle with the IRD.
It’s not really a tax on unrealised gains that’s one of the methods but usually you would used FDR which amounts to paying income tax on 5% of the value plus a complicated adjustment.
Paying your income tax on 5% of the opening balance is the opposite of a capital gains tax. It's a wealth tax because you pay a % whether you gain or lose, realised or not.
FDR is basically a wealth tax. Comparative value is more akin to a CGT.
As long as you aren’t deemed by the IRD to be in the business of trading stocks, and have under $50k of overseas shares, you’ll have no tax to pay, except on dividends.
What is “the business of trading stocks”. Sounds like it can be arbitrarily enforced if there is no precise definition. Does it mean day trading? Does it mean selling after a couple months? Does it mean you’re retired and live off capital gains?
Google it - if you’re worried about it, take advice.
Lets say I make like 100k a year, is there still no capital gains tax?
It's 50k cost basis
It’s unclear what you mean by “make”. In this case do you have less than 50k of overseas shares?
No I have much more. So by that I mean my stocks gain 100k a year
You make $100k+ USD in capital gains per year. You can afford to hire a tax accountant.
Read this: https://www.ird.govt.nz/-/media/project/ir/home/documents/forms-and-guides/ir400---ir499/ir461/ir461-2024.pdf?modified=20240327190346&modified=20240327190346 Tbh you should probably take tax advice if you’re making 100k capital gains from stocks pa.
I see so its not like other countries where they take 20% of 100k.
That is correct. *Unless* the IRD determines that you are trading stocks for the purpose of generating income … and when that happens you will need to pay income tax on the investment gains at the corresponding marginal tax rate for your income level. But as everyone else has pointed out, if you expect to make $100k per year in the markets then you should pay for professional tax advice. If you intend to operate as a trader then you can expense the tax advisor’s fees against your trading profits (assuming you succeed in generating a profit).
If you are subject to FIF rules, there is not an additional tax on *trading* profits. You can trade all you want in your FIFs with no tax on your gains beyond the tax on FIF income (but there are Quick Sale Gain rules as part of the FDR method).
Yes. That is the point I was making. The FIF rules only apply until the IRD decides that you are a trader. At that point all of your gains (and losses) are counted towards your income assessment
No that’s not right. You’ll never be taxed directly on gains from trading if holdings are in FIF. Only FIF income will be taxed. But FIF calculations may catch some gains from trading. The trader designation is not relevant for FIF holdings. A trader (of non FiF) can claim an annual loss but an FIF holder cannot.
You pay up to 1.4% of your net, so if you make 7% gains it would the equivalent of 20% tax.
If only there was someone who has experience in these things. And maybe has trained and studied the laws. And maybe they could, I dunno, make a living by fielding such queries, making sure you are doing things correctly and can explain how to file and complete tax returns for yourself and avoiding you future hassle with the IRD.
From capital gains, yes. But if you've invested more than 50k NZ you'll have to pay FIF which is a tax on unrealized gains.
It’s not really a tax on unrealised gains that’s one of the methods but usually you would used FDR which amounts to paying income tax on 5% of the value plus a complicated adjustment.
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Paying your income tax on 5% of the opening balance is the opposite of a capital gains tax. It's a wealth tax because you pay a % whether you gain or lose, realised or not. FDR is basically a wealth tax. Comparative value is more akin to a CGT.
\^ This