How Do Taxes Work With Your Crypto Assets In New Zealand?

• What is inclusive of crypto assets in New Zealand?
• How is your crypto asset tax calculated?
• What is your crypto asset income tax as an individual?
• What is your crypto asset income tax as a business entity?
• How can you work out and manage your crypto asset tax?

Cryptocurrencies like Bitcoin, Dogecoin, and Ethereum are categorised by the Inland Revenue into a broader category of crypto assets. As with any assets, it’s subject to appropriate taxation for whatever purpose set by the NZ government. 

Over the past few years, there were no clear crypto tax rates in New Zealand. It’s unclear whether there are special rates or rules, especially as it’s a new market in the country. Finally, IR Spokesperson Tony Morris clears, “crypto-assets are treated as a form of property for tax purposes.” This means no ‘special’ rules apply to crypto assets.

For a more elaborate explanation of how taxes work on crypto assets, read on.

What is inclusive of crypto assets in New Zealand?

Crypto assets are anything with a cryptographical value that can be used to trade, transfer, or store electronically. All of them use digital ledger technology — one of the most popular ones being Blockchain technology, which most cryptocurrencies are under.

Aside from the most famous cryptocurrencies like Bitcoin, Dogecoin, and Litecoin, crypto assets also include:

• Digital financial assets
• Digital tokens
• Virtual currencies
• Payment tokens
• Security tokens
• Utility tokens

If you see any of these terms, expect them to be taxed according to the rates set by the government. As the crypto market is a rapidly growing sector, different terminologies may arise as the industry develops.

Read: Guide To Cryptocurrencies In NZ: Invest, Buy and Trade

How is your crypto asset tax calculated?

All the income you’ve received from trading crypto assets is taxed. It’s very important to convert your crypto income or loss to NZD before indicating the net income in your tax return. You must also sort out your income and expenses before you submit your application to IR. 

Keep all the records and transactions, so you can claim deduction losses if your crypto is stolen or used in fraudulent activities. If you have difficulty calculating and filing them yourselves, you can always ask a professional.

To support your tax filing and return, file the following records. If you can track your records from seven years ago, keep them and make copies or back them up as much as possible.

• Your crypto asset type
• Exact dates of your transactions
• Transaction types like the ones you’ve received or used
• Total number of units
• The total value of your transaction in NZD
• Number of units of each crypto asset recorded at the start and end of the year
• Relevant exchange records and bank statements
• Your wallet addresses

What’s the process of taxing your crypto income tax?

The process of completing your tax return depends on whether you run crypto assets as an individual or as a business entity. If your crypto asset income or loss doesn’t fit into any of these categories, you can file your tax return as an ‘other income’. For all classifications, you need to prove that your income would have been taxable before claiming a loss.  

To know how taxes work as an individual or as a business, here’s a quick overview.

What is your crypto asset income tax as an individual?

All New Zealand residents are taxed in their income, but non-residents can also be taxed if their crypto-asset income has a source in NZ. Morris says releasing an updated guide is a “good opportunity for people to review the tax positions they have taken previously and make voluntary disclosures if their income from crypto-assets hasn’t been returned correctly”.

As long as you mine, use, trade, or acquire crypto assets to exchange or sell them for profit, you have to pay taxes to IR. According to the laws of New Zealand, you need to file your tax return and pay IR on or before the end of the tax year, which is 31st March. 

The amount of tax you need to pay depends on how much income you have. Check out this table to know how to calculate your taxes. This new rate applies from 1st April 2021, according to the Inland Revenue.

What is your crypto asset income tax as a business entity?

If your business deals with crypto assets — whether you use, trade, deal, exchange, or mine — and earn a hefty income from it, make sure to pay taxes as well. Businesses that don’t deal directly with crypto, but use them in one form or another must also account for these assets. This means they need to pay income taxes as well.

On top of crypto asset taxes, you also have to pay for standard PAYE and fringe benefits taxes. If your employees are paid in crypto, this should also be accounted for when doing your taxes. “As the industry is constantly evolving, Inland Revenue will continue to consider other crypto-asset-related tax issues as they emerge,” Morris said.

The crypto rate tax returns for New Zealand businesses are filed on or before the first year of your operations. Provisional tax combined with GST payments is paid in instalments after the first year. Self-employed Kiwis are considered and taxed as individuals.

Here’s a complete table on how to work out your crypto asset tax depending on the type of your business or organisation, according to the Inland Revenue.

How can you work out and manage your crypto asset tax?

As crypto asset taxes work just like any regular taxes in New Zealand, you can use your myIR account to manage and track your taxes. It’s important to note that this is just a quick guide. Taxation laws, rates, and codes are ever-changing, so it’s best to get updates before filing and submitting your tax returns.

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