The short answer
New Zealand has no general capital gains tax, so many people assume a profit on gold or silver is tax free. That is not Inland Revenue's position. IRD's published view is that proceeds from selling bullion are usually income, and therefore taxable, unless you can show you bought it for a dominant purpose other than eventually selling it.
This catches a lot of first time buyers by surprise. It is worth understanding before you buy, not after you sell.
Why bullion is treated differently
The relevant rule is section CB 4 of the Income Tax Act 2007, which makes taxable any amount you earn from selling property you acquired with a purpose of disposal. IRD applied that rule to bullion in QB 17/08: Are proceeds from the sale of gold bullion income?, issued in September 2017 and still listed as current.
IRD's reasoning is straightforward. A gold bar pays no dividend, no interest and no rent. It produces nothing while you hold it. So the only way anyone can ever realise a return from it is by selling it — which, in IRD's view, points to a dominant purpose of disposal at the moment you bought it.
The reasons that do not get you out of it
IRD accepts the presumption can be rebutted, but places the onus squarely on the taxpayer. It also specifically addresses the explanations bullion buyers most commonly give, and treats them as not sufficient on their own:
- Holding it as a long term investment
- Buying it as a hedge against inflation
- Buying it to diversify a portfolio
- Holding it as a store of value outside the monetary system
If those are your reasons, IRD's view is that you still had a dominant purpose of disposal, because every one of them still ends with a sale. This is the part that surprises people most, and it is the part worth raising with your accountant early.
Does this apply to silver, platinum and copper too?
QB 17/08 is written about gold, but IRD notes the same principles apply to the disposal of any non income producing asset. In practice that reasoning reaches silver, platinum and copper bullion as well. The metal changes; the logic does not.
Tax and GST are two separate questions
It is easy to conflate these, and they work in opposite directions:
- GST is about what you pay when you buy. Investment grade gold, silver and platinum meet the "fine metal" definition and are exempt, so no GST is added. Copper and titanium are not fine metal, so GST applies. We cover the thresholds in our guide to GST on bullion.
- Income tax is about what happens when you sell. That is where QB 17/08 applies.
So a gold coin can be GST free on the way in and still produce taxable income on the way out. Both statements are true at once.
What this means practically
None of this makes bullion a bad thing to own, and it does not make anyone's tax position automatic — it depends on your circumstances. But a few habits make life much easier:
- Keep your paperwork. Invoices, dates and prices paid. If you ever need to explain your position, contemporaneous records do the work that memory cannot.
- Write down why you bought. If your purpose genuinely is something other than disposal, record it at the time of purchase rather than reconstructing it years later.
- Talk to your accountant before you sell, not after. The treatment is easier to plan for than to unwind.
- Do not rely on "there's no CGT in New Zealand." It is true, and it is not the rule that applies here.
When you do come to sell
Whatever the tax position, a clean sale is a documented one. Original packaging, assay certificates and purchase paperwork all make a piece faster to authenticate and easier to price. Williams Bullion has a bullion buy back service opening at our Christchurch showroom, and we are happy to talk through what your items are before you commit to anything.
If you are still building a holding, you can browse our gold and silver ranges, both of which are GST exempt.
This article is general information only and is not tax or financial advice. Your tax position depends on your own circumstances and on the specific facts of each purchase. Confirm the details with Inland Revenue or your accountant before acting.
Questions about a specific product? Visit the Williams Bullion showroom at 124 Peterborough Street, Christchurch, or call +64 3 667 2327.