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There’s tax in that gold!

New Zealand Inland Revenue says in most cases the sale of gold bullion is taxable.

According to a “Questions we’ve been asked” published by Inland Revenue on 20 September, “in most cases gold purchased in bullion form will be purchased for the dominant purpose of disposal”.

That means in most cases a sale of gold bullion will be subject to income tax. If you sell it for more, that’s tax to pay. If you make a loss, that might mean less tax to pay on other income.

Inland Revenue reckons gold bullion is not known for providing benefits such as ongoing returns while it is held or voting rights etc. So, that means, generally, the dominant purpose for which gold bullion is purchased is its ultimate resale.

However, they accept there may be some cases where a taxpayer can demonstrate eventual sale of the gold was not a dominant purpose for which the gold bullion was bought.

The document gives some examples using cases from other countries. Inland Revenue explains the very limited circumstances they consider would not trigger a tax liability. For example, if the gold bullion is bought to extend and diversify a portfolio in the hope it would be a good long-term investment able to be used if the taxpayer became unable to work then tax might not apply to an eventual sale, particularly if the taxpayer can demonstrate they intend to work until a ripe old age. So it seems it probably needs to be a “just in case” or “rainy day” type of investment which is hoped never to be realised.

It is difficult to work out exactly where the line is drawn because some of the examples given by Inland Revenue seem to be somewhat at odds with one another.

You therefore need to think very carefully before assuming any gain you’ve made selling gold bullion is not subject to tax in New Zealand!

As Inland Revenue point out, the onus is on the taxpayer to prove tax does not apply. Given the taxable presumption Inland Revenue say they’ll apply in practice, you should expect resistance if you’re intending to argue your gold bullion is not taxable.

You can find the Inland Revenue document here

 

Good luck!

 

Iain

 

 

 

 

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Time to tidy up the GST Act?

The GST Act needs to be tidied up and made more user-friendly in my view.

I read the GST Act every day. Sad, I know.

Anyway, it used to be pretty simple to navigate around but lately I’ve been finding it a bit more of a challenge. (No smart comments about aging please).

In the copy I have the first 20 sections take up more than half of the total pages. The remaining 67 sections the other half. There are some very long sections in that first part and confusing numbering because of amendments over the years.

There are seven sections numbered 15, six numbered 19, eight numbered 20, twelve numbered 21 and nine numbered 78.

Section 5 has fifty-two subsections!

I know it’s not earth shattering stuff, and doesn’t change the substance of the law, but it just would be nice if, for its thirtieth birthday (2015) this dearly loved piece of NZ tax legislation were rewritten and tidied up.

Cheers

Iain