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!
In New Zealand, cryptocurrency is 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 crypto 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.
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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 recent tax years, the IRD has used this information to send letters to crypto investors warning them to report their income or face an audit.
In addition, it’s important to remember that transactions on blockchains like Bitcoin and Ethereum are publicly visible. The IRD and other tax agencies around the world use blockchain analytics to match known investors to ‘anonymous’ wallets.
Remember, the IRD has the ‘powers to investigate’ if you don’t accurately report your taxable income. The tax agency is granted wide powers by the law, and can even search private homes without a warrant.
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.
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In New Zealand, the tax year runs from April 1 to March 31 of the following year. For example, the 2024-2025 tax year will end on March 31, 2025.
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.
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 most miners will 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.
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.
However, you will be required to pay tax if you dispose of cryptocurrency received in a hard fork.
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. You cannot claim unrealized losses.
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. In addition, selling NFTs to investors inside of New Zealand is subject to GST.
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.
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, you will pay income tax when you eventually dispose of your gifted cryptocurrency.
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 regain 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.
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’.
It’s likely that most crypto investors in New Zealand won’t be taxed as businesses. According to the IRD, ‘If you have a full-time job and spend some of your spare time buying and selling cryptoassets, you’re probably not a trader unless your activity is highly organised and structured.’
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).
It’s recommended to 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: Selling NFTs to customers inside of New Zealand is subject to 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 if the blockchain exists outside of New Zealand, your income is zero-rated for GST purposes.
Looking for an easy way to calculate your crypto taxes? With CoinLedger, you can generate a comprehensive crypto tax forms in three easy steps.
Step 1: Connect your CoinLedger account to your exchanges and wallets.
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Step 2: Watch the platform calculate your income in NZD!
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Step 3: Click the View Report button to download your income tax report!
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Get started with CoinLedger for free and see why more than 500,000 investors across the globe use the platform to take the stress out of tax season.
Let’s cap things off by answering some frequently asked questions about cryptocurrency taxes.
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This guide breaks down everything you need to know about cryptocurrency taxes, from the high level tax implications to the actual crypto tax forms you need to fill out.
