This information is current as at the date of publication. For the latest information about tax and crypto, please engage a tax accountant and/or the IRD
Are you left wondering about tax on crypto? We’ve put together the latest updates on tax and cryptocurrencies to make things easy for you when it comes to tax time.
Cryptocurrencies and blockchain technology were not conceived when our current tax legislation was written, and they don’t neatly fit any of the categories.
The IRD has now published guidance to explain how New Zealand’s existing tax laws should be applied to bitcoin and other cryptocurrencies.
Cryptocurrency tax guide
The key message is that cryptocurrency should be treated as property for tax purposes. The impacts of this are the following:
Income tax will normally apply to any sale of cryptocurrency – whether sold for NZD/USD or traded for another cryptocurrency
GST applies on cryptocurrency transactions – BUT – the IRD is proposing to remove this, which is a very good thing!
Income tax on cryptocurrency
Just like any other activity that you do to make a profit (running a business, trading stocks, setting up a lemonade stand) you need to pay income tax on the profits you make. Or, if you make a loss, this can be offset against the tax you have paid in other areas (say the PAYE you pay on your salary).
What if I haven’t sold my bitcoin?
If you haven’t sold your cryptocurrency, then no tax applies. However, if you’ve moved your cryptocurrency from one coin to another, eg BTC to ETH, then that move is taxable. You will need to work out what the NZD value of the BTC was when you bought it, and then work out what the NZD value of the ETH was when you made the trade. The difference between those two NZD amounts is taxable.
What if I made a loss on my trades?
That’s unfortunate! But on the bright side, it means you can offset that loss against the income you made from other sources. You do this at the end of the tax year when you file your tax return.
How do I actually do my taxes on cryptocurrency?
After the end of the tax year (31 March) you need to file an IR 3. In this, you include all of the income you have made in the year from all sources (including wages, dividends, cryptocurrencies, etc) and all of the taxes you paid. The form then helps you calculate if you have paid too much tax or not enough.
Need more help?
You may wish to talk to an accountant to help you sort out the tax you owe, or are owed on your cryptocurrency activities.