Dear Kevin, I spend a lot of time on Trade Me buying goods, which I then try to re-sell at a higher price. This is not my full-time job, I’m an at-home mum. I do this as a hobby and to bring in extra money to the home. I have never paid tax on my profits, but I see in the paper a lot of people using Trade Me don’t pay tax when they should. Who should pay tax on their Trade Me profits and does that include me?
I don’t know how much money you’re making, but from what I understand you are liable to pay income tax on any profits. The IRD says you’re regarded as being in business when you bought goods with the purpose of selling them on, if the whole purpose was to make a profit or your business deals in these types of goods.
The first two seem to apply to you, so you would be regarded as being in business, although you see it as a hobby. The IRD says if you buy goods then sell them through Trade Me, your tax obligations are exactly the same as if you were on-selling goods in a shop.
Question is, what do you now do? If you have made only a few hundred, or possibly even thousand, dollars from this, the IRD may let you off income tax. The IRD suggests making a voluntary disclosure and discussing it with them. This would reduce your exposure to penalties.
Do you have a consumer question for Kevin? Email [email protected], or post to Weekly Consumer, PO Box 90119, Victoria St West, Auckland 1142.
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