If you buy shares with the intention to sell them at a profit, Inland Revenue (IRD) may consider you to be a share dealer or trader.
Confusing? Yes the law is a little vague.
The IRD generally looks at these behaviours as indicators someone may be a trader:
- regularly buying and selling shares,
- significant amounts invested in shares, especially when a portion is borrowed
- buying highly volatile shares to flip at a profit (e.g. you jumped on the GameStop rocket to the mooooon 🚀).
Ultimately, it’s the IRD’s responsibility to prove that you’re a trader, but it’s good practice to keep records of your buys and sells. For example, if Tesla jumps in price and you sell to bank the profits, that could be considered trading behaviour. If you wanted to buy a house and sold your Tesla shares so you had the cash to invest in something else, that probably wouldn’t be.