The IRD says all gold gains are taxable for holders of bullion, bars, investment coins and 'paper gold'.
They are not 'capital gains' as some believe.
The position applies to all other precious metals too.
'Intent' is the key issue.
The IRD says that, no matter what the time horizon, because precious metals never return an 'income', the only reason to buy them is for the gain in value they will produce.
And that is enough to qualify that gain to be taxable, no matter how long you have held it.
It has published an "exposure draft - for consultation and comment" on the matter. You can read it here.
In it, IRD says: “The Commissioner considers that the very nature of the asset leads to the conclusion that it was acquired for the purpose of ultimately disposing of it.
“Such a commodity does not provide annual returns or income while being held and has use or value only in its ability to be realised.
“The onus is on the taxpayer to show that they did not acquire the property with the dominant purpose of disposal."
Only investors who could prove they purchased gold (or any asset) with “no clear purpose” may not be subject to tax, according to the IRD.
“The Commissioner considers it unlikely that a taxpayer could satisfactorily show that they purchased gold bullion with no clear purpose in mind,” the exposure draft says.
Gold bugs often contend that 'gold is money', but these days that is a hard position to sustain.
The claim that gold is held as an 'inflation hedge' or as 'disaster insurance' doesn't seem to sway the IRD. Neither of these reasons qualify if for tax-free status, they say.
What the tax authority is targeting is 'investment gold' and not jewellery.
The IRD exposure draft says its tax proposal applies to “gold bullion, or gold units or certificates that do not pay interest or dividends” as well as other precious metal investments.
The purchase of gold and other precious metals for business purposes (such as jewellery or a bullion trading exchange) would not be subject to the same investment tax treatment. They are taxable in the normal way business assets are.
Gold purchased in the form of “jewellery, antiques, ornaments, collectables” may also be exempt from tax on sale as long as the items were not bought for “the dominant purpose of disposal”.
The IRD says taxpayers must consider the “totality of the circumstances” when such an exemption may be valid.
“These include: the nature of the asset, the taxpayer’s occupation, the circumstances of the purchase, the number of similar transactions, the length of time the property was held, and the circumstances of the use and disposal of the asset,” the IRD paper says.
The public have until April 7 to make a submission or comment on the Exposure Draft.
An issue that Inland Revenue and taxpayers encounter from time to time is whether or when there will be tax consequences from the sale of gold bullion investments. It is sometimes suggested that because gold is often held as a long-term investment or hedge against inflation, there are no tax implications. However, others have taken the view that investments in gold will give rise to tax implications.
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47 Comments
I think gold is money, it has out lasted all other currencies and no doubt will outlast the fiat we have today.
If it is not money why do central banks keep purchasing it?
http://www.bloomberg.com/news/articles/2015-02-12/central-banks-hungry-…
http://www.zerohedge.com/news/2016-02-28/why-dutch-central-bank-suddenl…
What if the value of your gold increases due to currency movements?
You have to put a monetary value on it to tax it, what if you do a swap?
What about bitcoin? http://finviz.com/forex_charts.ashx?t=BTCUSD&tf=w1
Bit of a hairy one trying to tax gold bullion and I dont agree with IRD, its a store of wealth and a gain is purely "accidental" from my point of view, ie intent should apply, especially if they say there is no time limit. Gold, how many ppl buy it to trade with? zero. Buy it as an emergency fund? some "weirdos", sure. I can but get a tin hat feeling that its a way to lock down / prevent ppls ability to store wealth rather than be forced to spend it.
Bitcoin is clearly used as a currency? a gain is purely incidental?
Its legally up to you to declare any profit from the re-sale of your painting or sculpture, not IRD's job to chase you up (although seems it may be now days..).
If you purchased your painting to look at, then sold it due to change in circustance (i.e no intent at time of purchase to profit from a cap gain) then no tax is due. Keep records and reasons for sale in case they come knocking.
If you purchased Auck property, made a loss on it for a few years, then sold it for a profit, then there is no reason why the IRD can not apply the exact same 'Gold' logic to this case. They would simply send a letter saying 'explain yourself' then the onus is discharged to the auckland speculator to prove they did not purchase with an intent to resale for profit (which if it is a pattern, i.e 2 or 3 properties all cashflow neg, all sold for profit, no matter what time horizon, will be incredibly hard to prove to court level which is a 'balance of probabilities test' i.e more likely then not.)
I would say almost all recent auckland property purchases yielding below 5% would be 'more likely than not' to be purchased for cap gain. Just a matter of time before IRD come knocking and the rest of NZ can take their share of these beaut Auckland house price rises.
Surely one of the attractions of gold as an asset is that it is beyond the reach of the IRD?
If it is taxable, then those selling at the loss in recent years should be able to claim a tax deduction?(edit: yes they confirm this)
The IRD is showing itself to being removed from reality here, laughably so.
Just one of the many flaws. How hard would it be to prove in court that gold or silver are money? Pound Sterling or Silver Dollar?
I guess I am not really opposed to a capital gains tax being applied in this instance, if someone gets caught in this trap then it is probably deserved.
The IRD has to tread very carefully here or it will set itself a precedent that could highlight its own incompetence. It seems the logical conclusion of their position is that the very fact of a sale is the entirety of the evidence required to prove that it was bought with the intent to do so. Good luck being a property investor if they turn that one on you.
If the IRD ever wanted to put this in front of the court it would likely end up answering questions on morality, questions I doubt they are equipped to answer.
behaviour patterns have been shown to be enough evidence to prove intent in property transactions.
Prove does not mean without doubt, it means more likely than not.
IRD act on behalf of all NZ'er who benefit from all things publically funded.
Questions of morality? Over gold investors? Prehaps, unless your buying and selling multiple times (trading pattern) then I dont think you'll have anything to worry about. Over trying to tax people flipping auckland property? I think it'l be the flippers whose morality will be exposed not the IRDs
The underlying moral principle I work from is that of "Unearned Income". IRD and property investors both have their heads deeply in that trough. So if your gold position is driven by exiting the trough then they really have no leverage over you. My initial point about PM's is that the gold investor is also removing themselves from the coercive powers of the IRD and courts.
Scarfie, I think the term "investor" is incorrectly used by you. Those physical bullion holders I know of are using gold as a store of value, also known as SAVERS, and to escape the fiat currency system of the banks as they are not safe! NOT as an "investment". There is a world of difference between a saver and an investor...
If gold is purchased with a true intent to store value (as opposed to cash - which is constantly being devalued) should gains be taxable?
If dollars depreciate over time, gold may increase in dollar value, but actually it may only the dollars losing value. Is it still fair for the IRD to assess "capital gains" in dollar terms with dollars being devalued so ridiculously? In real terms the gold may only be holding it's value.
You nailed it precisely! Which makes me think, if anyone is thinking of organising a submission or, even better, is planning to test the IRD commisioners' views in a legal avenue, I will be first to contribute! It is simply amazing how desperate governments and their revenue gathering agencies have become.
Try another twist, someone giving up on banks due their attitude, risky business and so on; unplugs all their funds from a bank and buys bullion instead. they will receive no interest, are subject to market variations in the price and for that matter currency fluctuations. Is it still taxable?
No its not taxable. Just don't sell or hold it in this country I would now say to be sure. IRD can only tax you on NZ "income" as other sovereign nations have their own taxes that you would be subject too. If you owned a home in the US for example and sold it for a profit.......that's the IRS's business.
Assets increasing in "perceived" value based on a fiat currency is not taxable......OTHERWISE every single 'family home' should ALSO be paying a capital gains tax based on their government evaluations annually/ PLUS.... every sale where an increased price was paid than you bought it for. Why else would people take at a mortgage that charges you interest per annum unless.......YOUR intention was to make a "capital gain"? Gold is just a metal that holds a basic intrinsic value that never gains interest, and only appears to gain value due to fiat currencies being the victim of inflation. Much of the increase in perceived gold value is via inflationary pressures and lack of faith is fiats.
Just another power grab. The government want a cashless society where people are forced to use banks. It makes it easy for them to freeze assets.
I have a small amount of gold because it's a hedge against bad times. It's laughable to think it will gain more than inflation over a long period of time.
Once again savers get to pay for everything and land bankers get off tax free while selling the next generation to China.
IRD has not caught up to the increasing global NIRP environment. Bullion holders can preserve their capital, and in addition not risk OBR rules giving them a haircut. That is two excellent and valid reasons that have nothing whatsoever to do with trying to "make money" out of disposing of it. I hope people submit on these points.
A few points:
- if you trade currencies for a gain, it is liable for capital gains taxation
- you only pay tax if you make a gain in NZD. If you lose, you get a credit against your income for that year
- if you don't like the capital gains taxation, you could buy a gold ETF and pay FIF tax on the assumed "income" of 5% of its value.
Yeah, nice try IRD. They have been given a Government mandate obviously to make alternatives to bank deposits as scary as possible. I spoke to Mint just last week regarding CG's and they made it quite clear it is not subject to CGT. Ofcourse anyone buying is starting with about a $170 per ounce negative buy back so IRD would be waiting a very long time for the gain. I suppose they will say next that GST also applies to .9999
No one buys gold for that reason I know (what IRD implied). They buy for the purposes of converting worthless fiat currency into something that has a physical 'finite' intrinsic value.
So the statement they make that: "because precious metals never return an 'income".... thus should make it quite clear to these fools that they have no warranted authority in this matter as no "income" has been generated, thus no tax to pay. The value is only based on the value of a fiat currency at any point in time. Otherwise they should be taxing every single thing ( including the family home) that may be perceived as raised in value
I would just say to IRD that the only reason people buy a home via a mortgage is for "the gain in value they will produce". Why else would someone take out a massive loan that charges interest per annum unless........expecting some form of financial gain by the end? (capital gains) So, IRD either need to put up or shut the hell....up!
Gold is what keeps the 'system' honest.
Are serious economists actually have a debate about whether it is a good idea to just print up cash and pass it out? Is that really monetary policy? Are governments really talking about banning actual currency, the very money created by that government? Money that depends, oh by the way, solely on people’s trust that the government will stand behind the money they are about to outlaw? Has everyone lost their freaking minds?
The recent discussion labeled the war on cash, the idea to ban large denomination bills in the US and Europe – $100 bills here and 500 Euro bills there – is possibly the most bizarre economic discussion I’ve witnessed in my entire career. Governments are seriously considering banning the money they’ve created. Money is a fragile social construct to begin with and governments should be very careful about doing anything that undermines the public’s confidence in it. If they ban $100 bills will that undermine confidence in all paper money? Will they come for the Fifties next?
http://www.alhambrapartners.com/2016/02/28/fear-loathing-on-the-market-…
You begin to really build a picture of just how corrupt our financial & tax system is when all these institutions & gov depts start almost colluding by closing (trying to close) all manner of monetary alternatives available from just joining the herded masses into massive mortgages and debts for life!
Their worst nightmare is people walking away from banks, closing their accounts, and removing any chance for IRD to trace and track along with no longer collecting RWT which is basically a tax on us for wanting some kind of monetary inflation compensation as our dollar loses value by the second.
I think you are onto something... I have said this before in other comment threads, the RBNZ, IRD and the governemnt at large are surely aware of the drain of funds from banks. I certainly would not expect them to openly admit to the failing faith in fiat currencies! But this desperate attempt to gauge opinions on the proposed theft from savers says all you need to know already. I hope that the comments here are very closely watched by those who float those ideas in the first place.
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