New zealand crypto tax
Cost Basis refers to how much your coin cost to acquire. Taxation New Zealand does not usually have capital gains tax, occuring only in rare instances. Currently all New Zealanders must pay income tax on cryptocurrency proceeds because they are considered taxable events.
The tax an individual pays on crypto depends on their individual income tax rate. If an individual has made income from crypto, an IR3 form needs to be filled out and most individuals will need to request a change to an IR3 filer. It remains unclear whether or not the GST act applies to crypto. Taxable events Any type of cryptocurrency transaction that results a tax liability is considered to be a taxable event.
As noted previously, mining cryptocurrency is considered a profitable event and is classified as a business. Proof of work uses huge amounts of electricity to solve complex mathematical problems that are at the heart of the validation process. Ethereum is in the process of moving to PoS. PoS awards validation rights on a lottery like basis.
To be in the draw, a validator has to put up, or stake, its own cryptocurrency. For example, Ethereum says users will need to stake 32 ETH to become a validator. PoS incentivises validators to do a good job, as they risk losing part, or all, of their stake for failing to perform a smooth validation or trying to cheat the system.
If you hold cryptocurrency, you can agree to lend stake your crypto to a validator, in return for a cut of the profits, plus your original stake back. However, as staking is a profit-making scheme, you need to pay tax on any money you make staking, as well as any profit you make from selling your crypto stake further down the line. Two separate profits, two separate tax obligations.
According to the IRD, the difference between a casual crypto purchaser and a professional trader involves: A high number of transactions Spending a lot of time and effort managing a cryptoasset portfolio Working on a cryptoasset portfolio on a fairly continuous basis However, if you are running a crypto business, and not just dabbling in crypto, different tax rules apply. The amount of money you receive from selling or exchanging crypto is classed as business income. Crypto tax: How much tax to pay?
While working out if you have to pay tax on your cryptoassets is easy: probably yes! Working out how much tax you must pay is more difficult.
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ADDED TO NEW EXCHANGE TWITTER CRYPTO
If you have used an exchange like Swyftx or Easy Crypto to buy cryptocurrency with NZD, AUD, or another fiat currency, you do not need to worry about these transactions being taxed. This means that, in most cases, you need to work out the gains and losses each time you exchange two cryptocurrencies.
Further, the guidance states that the sales price should be accounted for in New Zealand dollars by looking up the market value of the cryptocurrency received. If you cannot value the crypto received at the time of the transaction, you can use the market value of the cryptocurrency sold instead.
This means that exchanging a stablecoin for another cryptocurrency is a taxable event in the eyes of the IRD. Note that since most stablecoins are usually pegged to a fiat currency, your gains and losses from stablecoins will in most cases be determined by how the NZD value is changing over time. Or more precisely, how the NZD value has changed vs the underlying fiat currency of the stablecoin typically USD from the date you acquired the stablecoin and until it was disposed of.
Tax status: Income tax Is selling crypto taxed in New Zealand? Selling cryptocurrency is taxed in New Zealand because the Inland Revenue Department considers any disposal of a crypto asset a taxable event. The only exception to this rule would be a scenario where you acquired the cryptocurrency without the purpose of selling it or making a profit in the future.
Unless you can provide solid proof that the purpose of acquiring the cryptocurrency was not to dispose of it in the future, the safest approach for all crypto investors in New Zealand is to consider all transactions where a cryptocurrency is sold to be taxable events. Any gains you have made will be taxed at the same rate as your ordinary income.
This means that you need to pay income tax on the profits during the tax year. Tax status: Income tax Taxes on crypto mining rewards To simplify tax reporting for residents of New Zealand participating in cryptocurrency mining activity, the IRD has provided clear guidance on the tax treatment surrounding the mining of crypto assets in the latest revision of its crypto tax guideline.
In short, cryptocurrency received from mining is in most cases taxable and the mining service will also be subject to GST. However, the GST rate will be zero since the service is provided to a blockchain that does not have a physical presence in New Zealand. How the cryptocurrency received from providing mining services is actually taxed depends on how the mining activity will be classified. In general, all of the following requirements must be fulfilled for the IRD to consider the activity a hobby: The activity must be conducted over a short time period The activity is not regular or business-like in any way The activity must require little to no planning or efforts The purpose of the activity must not be related to making a profit The purpose of the activity must not be related to selling the coins in the future As we can see from this, most people who are mining cryptocurrency will most likely have a financial motive behind it, and the activity will therefore not be considered a hobby.
However, if the IRD thinks that you are only mining crypto as a hobby, you do not need to pay tax on the crypto received. The sales proceeds are also completely tax-exempt if you decide to sell the coins in the future. Tax status: Not taxed Mining cryptocurrency as a business The IRD has stated that you are in a business if you are mining cryptocurrency regularly to make a profit.
The most important deciding factors are how long you are mining for, the size of your operation, and how much time, effort and money you put in. If you are considered to be carrying on a business-like mining operation, you need to pay tax on the mining rewards at the time you receive them in addition to tax on any profits made when disposing of the coins in the future.
More information about the factors the IRD looks at can be found on their website here. Tax status: Income tax Mining cryptoassets for ordinary income How to differentiate mining crypto as a business from ordinary income purposes is not very clear. The IRD does not provide any specific factors used to determine whether the activity will be classified to be carried out for income purposes specifically.
Mining activity classified as ordinary income is in fact taxed in a similar way as mining as a business. This means that you will need to pay income tax on the mining rewards when you receive them, but also tax if you make a profit when you dispose of the coins later if you mined them for the purpose of selling or exchanging them.
Tax status: Income tax Mining cryptoassets for a profit-making scheme Mining activity classified as a profit-making scheme falls between a business-like operation and mining for ordinary income. The IRD mentions that if your main purpose for mining cryptocurrency is to make a profit, but if the operation is smaller in size and carried on for a short time, it may be considered to be a profit-making scheme instead of a business operation.
How are crypto assets received from mining as a profit-making scheme taxed? Similar to both business activity and mining for ordinary income, the mining rewards are taxed as income when you receive them in addition to any profits from selling the mining rewards at a later time in the future. Tax status: Income tax Crypto staking rewards taxes The Inland Revenue Department includes cryptocurrency rewards received from verifying transactions in a Proof-of-Stake blockchain in the same tax bucket as mining rewards from Proof-of-Work blockchains.
This means that cryptocurrency received as staking rewards is taxed as income at the time you receive the coins, but also taxed if you decide to sell the coins later and you make a profit. Similar to cryptocurrency mining, staking will be considered either as a profit-making scheme, as a business operation, as ordinary income, or just a hobby.
If the IRD considers your staking operation to be just a hobby, your rewards and also potential future profits from selling are completely tax-free, but keep in mind that there are very strict requirements for an operation to be considered just a hobby. Tax status: Income tax Are crypto airdrops taxed?
In New Zealand, cryptocurrency received as an airdrop is taxed either at the time of receipt, disposal, or both. What determines how the cryptocurrency is taxed comes down to the factors surrounding the operation and activity related to receiving the airdrop. According to the IRD , an airdrop is generally taxed on receipt in these cases: Your cryptocurrency activity is considered a business You acquired the airdrop as part of a profit-making scheme You provided any services and received the airdrop in return for providing said services You receive airdrops on a regular basis Cryptocurrency airdrops received that do not meet the criteria above will not be subject to income tax at the time of receipt.
In such cases, the crypto asset received takes on a cost basis equal to zero so that the full amount is taxed at the time of disposal in the future — which brings us to the next question: When is a cryptocurrency airdrop taxed at the time of disposal?
Your cryptocurrency activity is considered a business You dispose of the airdrop as part of a profit-making scheme You provided any services and received the airdrop in return for providing said services Acquired the cryptocurrency with the purpose of selling it later As we can see, there are quite many factors to consider when deciding whether or not the airdrop will be subject to taxation at the time of disposal.
This means that the best we can do at this point in time is to study how other countries consider this type of transaction from a tax perspective, but also what the general consensus is among tax professionals.
While we strongly encourage you to contact a tax advisor if you are in doubt about how to report your taxes, here is our general take on the topic. Most exchanges that offer trading futures contracts will provide you with a history of the realized pnl from your trade history. But remember, their answers contain general information only and you should always seek professional advice tailored to your own situation.
Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. How can I avoid paying tax on crypto? A: New Zealand treats crypto assets kind of like property. But if things go wrong and you make a loss, you should be able to claim a deduction.
What exactly are the taxable event triggers? A: Buying, selling or trading crypto typically means your intention is to earn money and therefore, these are taxable events. What it comes down to is how did you get this crypto?
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