Are the proceeds of selling gold and other commodities taxable? IRD thinks yes.
IRD has concluded that the proceeds of selling gold bullion (gold bars, gold coins, certificates or units in gold) is taxable income. Tax legislation treats as income any amount a person earns from selling property the person has acquired with a purpose of disposal. IRD has reached this conclusion because gold bullion does not provide annual returns of income while held. Accordingly, the only way for a taxpayer to realise a return from an investment in gold bullion is for the person to sell it. IRD’s view is this indicates the person must have had a dominant purpose of disposal when the taxpayer acquired the gold.
IRD does accept that in some situations a taxpayer’s dominant purpose in acquiring gold bullion may be other than disposal. However, the presumption is that this is not the case and the onus is on the taxpayer to provide evidence to rebut the presumption. IRD states that a taxpayer’s purpose in acquiring gold either as a long-term investment, a hedge against inflation, for portfolio diversification, or as a store of value outside the monetary system is not sufficient to rebut the presumption of a dominant purpose of disposal.
What this means for you
If you are selling gold bullion, IRD will expect you to return the amount received from selling it as income. You will of course be entitled to a deduction for the cost of the gold bullion and any costs incurred in selling it. If you do not return the amount as income, you need evidence to rebut the presumption you acquired the gold bullion with a dominant purpose of disposal.
While IRD’s statement expressly deals with the proceeds of selling gold bullion, IRD notes that the principles apply equally to the disposal proceeds of any non-income producing asset.
If you are selling gold or another non-income producing asset, talk to a Findex adviser about the potential income tax issues.