Given our turbulent times many people are both looking at stretching their dollars further by buying second hand and having a clean out of their stuff. I would imagine online platforms like Trade Me and Facebook Market Place have had high transactions of late.
Just about every Kiwi has bought or sold something on Trade Me at some point in time. So, are you liable to pay tax on the proceeds of what you sell?
- If you are selling things that you personally own, that were not originally purchased for the intention of on selling, then you don’t have to worry about tax.
- If you are acquiring goods for the purpose of reselling them, then you are ‘in trade’ and need to pay tax on your income.
If you are doing a bit of both then you will need to have two separate member accounts with Trade Me so you can clearly distinguish between the two. I have met a number of people who have bought and sold a few things for themselves personally, found it worked well and then started doing it to generate an extra income. Beware of thinking to yourself just a business few trades will be fine.
The chart below will help you work out if you are liable for tax on what you sell.
Whilst I have referred mainly to Trade Me, the same principles apply for any online business. And before you think you are smarter than the IRD, remember how comprehensive technology is today and that the IRD generate a lot of income chasing and fining people who don’t pay their appropriate taxes.