Inland Revenue are reminding share investors of their obligations, and some commentators say a lot of people may potentially be caught. File photo. Photo: RNZ / Rebekah Parsons-King
If you're buying shares with the intention of selling them for a higher price in future, take note: You might have a tax bill to pay.
Inland Revenue (IR) has released draft guidance reminding share investors of their obligations, and some commentators say a lot of people may potentially be caught.
Among the points covered by the guidance, it makes clear that even people who only make occasional share sales need to pay tax on their gains if the shares were bought for the purpose of reselling.
It also outlines the expectations of people who hold offshore investments to which foreign investment fund (FIF) rules apply.
"We encourage investors to keep records explaining the reasons for their share purchases," IR said in a statement.
It said it did not have data on how many people were likely to be making transactions in shares that ought to be taxable, but were not reported.
Deloitte partner Robyn Walker said IR had a lot of information about investments but did not know what people's motives were when they bought shares.
"What they are making clear with this statement is that if you are acquiring with a dominant purpose of sale, then any profit should be taxed. The onus is on the taxpayer to ensure they are documenting what their intent is when they purchase shares, as IR may check.
"This isn't a new rule, but it is something that some people might not have been aware of. Until more recently a lot of people would not have been purchasing shares because it may have seemed too complicated or expensive. The advent of online platforms has made share investment a lot more accessible to a lot more people - which is great for people's financial literacy - but normal tax rules still apply, so if someone thinks it is a good way to make additional money, they should remember they will need to pay tax on sale."
Kernel founder Dean Anderson said it appeared that "quite a lot" of Sharesies investors were buying shares to later sell.
"If you look at their index, the net buy/sell ratio is never far off one, being for every $1 buy there is $1 of sell."
There was also a lot of movement in speculative stocks, he said, such as AMC, Gamestop and Nvidia, which have had volatile share prices.
He said at Kernel there was a 6-to-1 buy-to-sell ratio.
"Investors should be conscious that just because they are small, doesn't mean they don't have obligations. The IRD has significantly greater insights today than ever before. Rather than find an individual, they get feeds of data from all sorts of sources, including being able to go to platforms directly - as they did with crypto platforms when they clarified their position that crypto is subject to income tax."
Sharesies investments lead Gus Watson said it supported Inland Revenue's intention to provide more clarity.
"Sharesies was engaged by IR as it went about producing the draft guidance that has now been released for consultation.
"Sharesies withholds, pays and reports tax on behalf of most New Zealand investors on dividend income only. This is presented to investors via an annual investor tax statement which shows tax withheld and then paid to the ATO, IRS and IRD. We also provide downloadable transaction reports and holdings statements, so investors have information to be able to file their own returns as required.
"However, Sharesies is not responsible for individual tax obligations and doesn't give specific tax advice to its investors. We don't have the information about how many investors have the intention to sell and should be subject to taxable share sales."
He said Sharesies' focus was on educating investors about their obligations.
