By Shelley-ann Brinkley – 17 October 2017

So you’ve decided you’ve missed the boat with buying an investment property – the horse has bolted so to speak – and you’re not confident in putting your money in the international share market, what with the uncertainty with Brexit and particular political wannabee heavy weights antagonising each other over the Pacific Ocean.

You’ve therefore decided to invest in some gold bullion as then you’re not subject to foreign exchange and share market fluctuations and you’re holding it for long-term investment so no tax to pay…or so you thought…

Until recently there has been two schools of thought on whether holding gold bullion for long-term investment is taxable; one being it is held on capital account and therefore any gain on sale is not taxable; the other being that as no income is received while holding the gold bullion, then the only purpose for acquiring the gold is the eventual profit on sale, which would make the gain taxable.

With no previous guidance from the IRD on the correct tax treatment it was left for taxpayers and their advisors to determine which side of the fence they sat. Given that uncertainty, the IRD has released a document (QB 17/08) which clarifies that in their view, any profit derived on the sale of gold bullion will be taxable if it was acquired for the dominant purpose of disposal.

In the IRD’s view, because gold bullion does not provide annual returns or income while it is held, nor does it confer other benefits, then it must have been acquired for the dominant purpose of ultimately selling it.

While this is clearly a subjective view, if you wish to argue that you did not purchase the gold bullion with the dominant purpose of selling it, then you will need to have clear evidence to support this.

Of course, if our left-wing party manages to have their way, this will all be academic as the eventual sale of your gold bullion (along with your other capital assets) will be subject to the proposed capital gains tax.

Drop me a line if you have any questions.

Shelley-ann Brinkley Associate – Tax Consulting
T +64 9 414 5444
E shelley-ann.brinkley@hayesknight.co.nz