In this guide, we’ll break down everything you need to know to report your cryptocurrency taxes in New Zealand. We’ll share how different transactions are taxed, the forms you’ll need to fill out, and break down a few simple steps you can take to save money on your crypto taxes!
This guide is updated regularly based on the latest guidance from the Inland Revenue Department.
We’ll break down the basics of cryptocurrency taxes — including how much cryptocurrency is taxed and how you can legally reduce your crypto tax bill.
We’ll do a deep dive in how to calculate and report your crypto taxes — including how to calculate your income and the forms you’ll need to report your tax bill.
We’ll discuss how different transactions are taxed — such as mining, staking, and crypto-to-crypto trades!
In New Zealand, cryptocurrency is considered a form of property subject to income tax.
Unlike other countries, New Zealand does not have a capital gains tax. All of your crypto income is grouped together and taxed at the same rate — whether it comes from gains on disposals or cryptocurrency that you earned.
Here’s a few examples of cryptocurrency taxable events in New Zealand.
When you dispose of your cryptocurrency at a profit, you’ll recognize income based on how the price of your crypto has changed since you originally received it. Examples of disposals include selling your cryptocurrency, trading it for another cryptocurrency, using it to make a purchase, or gifting your cryptocurrency.
If you dispose of your cryptocurrency at a loss, you can reduce your taxable income for the year!
When you earn cryptocurrency, you’ll recognize income based on its fair market value at the time of receipt. Examples include earning mining, staking, or referral rewards.
In New Zealand, cryptocurrency is subject to normal income tax rates. You’ll pay 10.5 - 39% tax depending on your annual income.
It’s important to remember that New Zealand uses a progressive tax system. That means that you won’t pay a flat tax on your entire income. Instead, you’ll pay progressively higher taxes on different portions of your income.
Many people believe that because cryptocurrency is anonymous, there is no way for government agencies to track transactions. This isn’t true.
In the past, the IRD has requested customer information from exchanges operating in New Zealand.
In addition, it’s important to remember that transactions on blockchains like Bitcoin and Ethereum are publicly visible. Tax agencies around the world analyse these transactions to crack down on tax fraud.
Remember, the IRD has the ‘powers to investigate’ if you don’t accurately report your taxable income.
Typically, the limit for the IRD to reassess your tax return is four years. However, there is no time limit in cases where the taxpayer submitted fraudulent or wilfully misleading information.
The penalty for tax evasion is 150% of the resulting shortfall. Alternatively, the IRD can choose to prosecute. This can lead to a fine of up to $50,000 and imprisonment of up to five years.
While there’s no legal way to evade your cryptocurrency taxes in New Zealand, there are strategies that you can use to legally reduce your tax liability.
In New Zealand, the tax year runs from April 1 to March 31 of the following year
The deadline for reporting your taxes is July 7, after the end of the tax year.
It’s important that you don’t wait until the last minute to submit your tax return. Collecting the information you’ll need to report your taxes takes time, so you should get started as soon as you can.
It’s recommended that you keep track of the following information for tax purposes.
Keeping detailed records of your crypto transactions can be difficult, especially if you’re using multiple wallets and exchanges. That’s why hundreds of thousands of investors use crypto tax software like CoinLedger to simplify the process.
Once you’ve collected the information you need for your cryptocurrency transactions, you can report your income on your MyIR Account on the IRD homepage.
Alternatively, you can fill out the Individual Tax Return Form (IR3) manually.
New Zealand tax policies differ depending on your residency status. Here’s what you should know when it comes to filing your cryptocurrency taxes.
If you are a non-resident, you will only be taxed on income that is sourced in New Zealand. In most situations, it’s likely that crypto income will not fall into this category.
However, there are certain situations where you may pay New Zealand taxes on crypto income — for example, if you have a crypto business based in the country.
If you’re a new tax resident of New Zealand or you’re returning to the country after 10 years, you may qualify as a transitional tax resident. In this case, you’ll get a 4-year ‘grace period’ where you do not have to pay taxes on offshore income.
According to the IRD, this includes income from the sale of crypto-assets (whether you acquired them before or after arriving in New Zealand).
However, some crypto income is still taxable during this period. This includes income from buying and selling crypto on a New Zealand exchange and/or receiving crypto as payment for labour.
If you’re considered a tax resident of New Zealand, you’ll be taxed based on your worldwide income. This includes any cryptocurrency income you may have — even if you acquired and disposed of your crypto-assets overseas.
Remember, you will be considered a ‘resident’ if you meet one of the following conditions.
If you’re not sure whether you’ll be considered a resident, check out the IRD’s guidance on the issue.
It’s likely that you’ll be taxed as a business in the following circumstances.
In some cases, trading cryptocurrency can rise to the level of business activity. Factors used to determine this include the frequency of your transactions, how long you hold your assets, and ‘whether your activity is organized and systematic’.
The IRD allows investors to use two different accounting methods to determine gains and losses from cryptocurrency: first-in-first-out (FIFO) and weighted average cost (WAC).
Let’s look at an example to better understand how these accounting methods work.
The answer is dependent on which accounting method Peter chooses.
With FIFO: The first BTC that Peter acquires is the first coin he disposes of. In this case, Peter’s gain is $15,000 ($25,000 - $10,000).
With WAC: Peter’s cost for acquiring crypto is $14,000, the weighted average of his two coins. In this case, his gain is $11,000 ($25,000 - $14,000).
Remember, you should use the same method year after year and keep records of which method you choose.
In most cases, crypto-assets are excluded from goods and services tax (GST). However, there are a few exceptions.
Receiving crypto as payment for goods and services: If you receive crypto in exchange for goods and services, you’ll need to pay GST. You’ll owe GST based on the value of your crypto-assets at the time you received them.
Selling an NFT to someone in New Zealand: If you sell more than $100,000 of NFTs to individuals based in New Zealand, you’ll owe GST. However, there is no GST if you sell NFTs to customers outside of New Zealand.
Crypto mining: In certain situations, you may owe GST on mined cryptocurrency. The IRD states that crypto mining can be subject to GST if you are providing supply for a blockchain that only exists in New Zealand.
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Buying cryptocurrencies with fiat currencies like BTC and ETH is not considered taxable.
When you sell cryptocurrency, you’ll recognize income based on how the value of your crypto has changed since you originally received it.
Trading cryptocurrency for another cryptocurrency is considered a taxable disposal. You’ll recognize income based on how the value of the crypto you’re trading away has changed since you originally received it.
There is no tax for simply holding cryptocurrency in New Zealand.
Transferring cryptocurrency between wallets that you own is not considered taxable.
However, you should keep records of your wallet-to-wallet transfers so that you can easily calculate your tax liability in the case of a future disposal.
In most cases, cryptocurrency mining is likely to be taxed as business activity. If you are mining cryptocurrency as a business, you can deduct the costs of relevant expenses such as electricity and mining equipment.
If you dispose of your mining rewards in the future, you may recognize additional income based on how the price of your mining rewards has changed since you originally received them.
Mining cryptocurrency may be non-taxable if you are pursuing the activity without the intention of making a profit. However, since crypto miners typically pursue profits, it’s unlikely that you’ll fall into this category.
Income earned from cryptocurrency staking is subject to income tax based on the fair market value of your crypto at the time of receipt. If you dispose of your staking rewards in the future, you may recognize additional income based on how the value of your crypto changed since you originally received it.
According to the IRD, airdrop income is taxable in the following cases:
If you do not meet this criteria, your airdrops will not be taxed as income.
You may recognize income when you dispose of your airdrop rewards. According to the IRD, airdrop disposals are taxable in the following cases:
The IRD states that there are some situations where airdrop rewards may have been ‘passively acquired’ and may not be subject to tax upon disposal.
During a hard fork, an existing blockchain splits and investors receive new units of cryptocurrency.
According to the IRD, hard forks are unlikely to be taxable upon receipt in most situations. The exception is if you own a crypto-asset business or acquired your cryptocurrency due to a profit-making undertaking or scheme.
According to the IRD, disposing of cryptocurrency received after a hard fork is considered taxable in most circumstances.
In some situations, you may dispose of your cryptocurrency for a lower price than you originally paid to acquire it. In this case, you’ll realize a loss. This loss can be used to offset your income (including income from your job) and lower your tax bill.
Remember, you must dispose of your cryptocurrency in order to claim a loss on your tax return.
Like other crypto-assets, income from NFTs is subject to income tax.
NFT sales: According to the IRD, gains from the disposal of non-fungible tokens (NFTs) are subject to income tax.
Buying NFTs with cryptocurrency: Buying NFTs with cryptocurrency is considered a taxable event. You’ll recognize income based on how the price of your crypto you are using to make the purchase has changed since you originally received it.
Creating an NFT: If you’ve created an NFT or NFT collection, your income from primary and secondary sales is subject to income tax.
NFT disposals are non-taxable if you acquired your NFT for personal enjoyment and not for profit. However, it’s your responsibility to prove the purpose of the original transaction.
If you sell more than $60,000 of NFTs in a 12-month period, you are required to pay GST. However, selling NFTs to investors overseas is zero rated for GST purposes.
The IRD has yet to provide guidance on DeFi protocols. Based on existing guidance, it’s reasonable to assume the following.
In New Zealand, giving a cryptocurrency gift to a friend or family member is considered a taxable disposal. If the price of your coins has appreciated since you originally received them, you will need to pay income tax.
Receiving a cryptocurrency gift is not considered a taxable event. However, disposing of your gifted coins is subject to income tax.
Fees related to acquiring your crypto can be added to your cost base. This can reduce your total taxable income.
If any of your crypto-assets were stolen, you may be able to claim the original cost of acquisition as a deduction on your tax return. To claim this deduction, you’ll need to show the following:
In some cases, you may claim your crypto-assets as stolen and later re-gain access to your crypto or receive compensation for your lost crypto. If you find yourself in this situation, you’ll need to recognize the recovered amount as income. The amount you can include as income is generally limited to the amount you claimed as a loss.
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