Tax Consequences of iPredict Stock Trading

Would anyone who is in the know be able to tell me if my trading a taxable activity?

ie Return any gain on investment. Claim any losses.

Obviously would need to know the opening and closing balances of my portfolio and amount deposited for the financial year.

Anyone want to take a stab?

I would expect no tax. Anything you make is a capital gain, NZ has no capital gains tax.

Guess I was moving along the lines of you are intention of making an income from the trading of shares, which maybe defined by the regularity of trading, volume traded and possibly return on investment (or lack thereof).

But sweet you've convinced me & I'm happy.

We always recommend you consult your accountant - really the only advice we can give. It is possible that dividends earned here are taxable.

I have been wondering about this for some time. I'm not an accountant, but I do work in a related field.

While admin is obviously right (i.e. consult your tax professional if you really want to know the answer, and don't rely on dodgy "advice" from some person you've never met on a forum - including me), I would be very suprised if iPredict gains of whatever kind are not taxable. Dividends (and for that matter, gains made from trading) seem to have the characteristics of "income" as that word is defined under NZ tax law. The other interesting question would be at what point the gains would be taxable (assuming that I'm right, and they are).

While I doubt that IRD would start rounding up all traders, I would probably be a bit concerned about this issue if I were one of the top traders. I imagine they would be first on the list if IRD started taking an interest.

I would be interested to hear the views of a chartered accountant on this. I'm sure there must be one here somewhere!

Isn't the analogy to the TAB/Lotto closer than buying shares/financial arrangements?

I'd lean towards it being hobby income for most people, which is not assessable (ie no tax, but also no deductions). Hobby income is contrasted with business income (defined as any profession, trade, or undertaking carried on for a profit), which is assessable.

The difference is between activities carried on with the intention of making a profit and activities where the receipts merely defray the expenses incurred in carrying out the activity. You look at the scale and volume of transactions, the investment of time and effort, etc etc.

But like everyone says, consult your tax professional. For your purposes I am making all this up off the top of my head. All information provided for entertainment purposes only.

Also I wouldn't describe your iPredict shares as "capital", since you probably bought them with the intention of selling them off, which would put them in your revenue account. Which is why stock market traders pay tax.

Read my lips: OF COURSE the gains on i-predict are taxable as income!! (What planet are the above comments from?) I can't believe that I'm reading this nonsense about "hobby income". What an utter load of cobblers.



Edited 1 time(s). Last edit at 06/07/2010 02:14AM by Honkyghost.

Does this means we can set up trading on Ipredict as a business and start claiming the tax back for all the hardware + depreciation, connection charges and copious amounts of caffeine and food we consume while trading

I don't see why not! What you've said about food and caffeine isn't strictly correct (tho my IRD consultant has always said "we let you have your coffee" but I don't see why legitimate principles shouldn't apply. - Claiming annual losses might turn out to be the biggy for traders like me! lol - Some people seem to have suggested that iPredict investments should be treated like TAB wagers. But the fundamental point about TAB wagers is that the government takes its cut from the TAB pools pre-dividend. If and when that ever applies to iPredict, then you'll be able to compare iPredict investments to betting on the horses. But until then I'd say it's just plain old taxable income or deductible losses. Sorry but they don't say that "death and taxes" thing for nothing.

Why wouldn't it be hobby income?

[www.mcleanandco.co.nz]

Intention to make a profit = Not a hobby

So if if profit is taxable, then a taking a loss is tax refundable right on the money in question?

I suddenly feel like I did learn something in those tax classes....

Generally if the income is taxable then the related expenses (including losses) are deductible.


There is a good chance it would be taxable but it depends on the context.

Firstly I very much doubt that it's going to meet the definition of a hobby for tax purposes. Especially if your hobby is buying and selling futures with the intention of profiting, (regardless of how you enjoy it and only do it in you spare time).

Secondly it could depend on how realise the gain. If you hold your contract until it closes then it might be considered gambling. It effectively no different than going down to the TAB and putting a bunch on money on the All Blacks to beat Japan next time they play. Gambling is not taxable because then gambling losses would be deducible and that just won't work out for the government.

But if you buy a future with the intention of selling it to make a profit then your likely to cop some taxes. Its sort of a sneaky tax that is capital in nature where your liable if profiting from the sale of something was your intention from the start.

And then for the people that take this to an extreme, significant time and effort and resources applied and what not might be considered to be running a business and that is going to be taxed for sure.

Overall with most of us only dealing with a net-worth of a few $100 at best I doubt the tax consequences would be a problem but with ipredict registered under security legislation I'd say any real money is probably going to be considered taxable.

I'm no expert on tax law, but isn't ipredict a zero sum game? As pointed out above, if winnings are taxable then losses should be deductable and so taxing ipredict activity vs not taxing it is likely to be approximately revenue neutral for the IRD (approximately, because people will be on different tax rates depending on their total income so this would have an effect). So a tax system involving ipredict trading would simply be a transfer from the winners to the losers. This assumes that the market maker is just like a regular trader and therefore would be able to claim tax back on its losses.

I'm not arguing for or against it being taxed, merely that the IRD is perhaps unlikely to declare that it should be if there is nothing in it for them. They may, however, take an interest once a few loss-makers start claiming...

It's a hobby. Hobbies are not taxable. Any financial gain is incidental to my enjoyment of this website. I enjoy the banter on the forum and I have a general interest in the contracts and their outcomes, whether or not I put money on a contract. The values and time involved support my view this is a hobby. Now if others are here for the purposes of making money, or they have a profit motive, then their gains are taxable. Whereas this is a hobby for me, and it is well entrenched that hobbies are not taxable.

Here's my brief take based on about 5 minutes of research at work while skiving off!

Per the iPredict Terms of Service s1.i.: "..the contracts traded are treated as futures contracts under New Zealand law, in order to provide certainty as to the legal treatment of the contracts."

My brief consultation with Staples Tax Guide 2011 plus a quick Google suggests these are therefore Financial Arrangements (see 470.20 in Staples for a wordy definition), and don't seem to fit under any of the excepted financial arrangements (470.25 in Staples). Most/all people here will be cash basis persons (470.75 in Staples) and therefore "the income or expenditure is returned on a cash receipts or cash payments basis." So if you pay $100 in and close out and withdraw $200, you return $100 of income on your IR3.

Please note that this is a hastily thrown together look at it and doesn't constitute advice, should not be relied on blah blah blah.