New Zealand Law Society - Gold bullion tax law interpretation inconsistent, NZLS says

Gold bullion tax law interpretation inconsistent, NZLS says

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It cannot always be assumed that people who purchase gold bullion do so for the purpose of disposal, the New Zealand Law Society says.

Commenting on the Inland Revenue Department's draft Question We've Been Asked: PUB00227: Income Tax – Are proceeds from the sale of gold income? (the QWBA) the Law Society says it disagrees with the QWBA's conclusion that gold bullion bought for investment purposes "will necessarily be acquired for the purpose of disposal".

That conclusion is inconsistent with other parts of the QWBA, the Law Society observes.

It also says gold bullion is sometimes acquired for purposes other than disposal.

The QWBA responds to issues encountered by IRD and taxpayers relating to whether or when there will be tax consequences from the sale of gold bullion investments.

Sale of bullion acquired for the purpose of disposal can attract higher tax rates than disposal of gold that was proven to be acquired for other purposes.

"Taxpayers acquire assets for a variety of different reasons, the Law Society says.

"In some cases taxpayers will acquire gold with the hope and intention of never disposing of it, but to set aside the gold as a store of value outside of the monetary system, as a security measure in case of government instability affecting the banking sector and the availability of cash (such as the events affecting Greece), or a global economic crisis whereby precious metals such as gold would provide a proven source of wealth.

"Not all purchase decisions are reached on a rational basis and in some cases a taxpayer may not have fully turned their mind to the question of why they have acquired a particular asset," the Law Society says.