Cryptocurrency is a virtual or digital currency that uses cryptography to secure transactions and control the creation of new units. It purchases services and goods and is often traded on decentralised exchanges. If you live in New Zealand and wish to invest in cryptocurrency, you must read the Crypto tax guide New Zealand.
Cryptocurrency’s popularity is growing, and governments are starting to take notice. While some countries have been quick to regulate them, others are still trying to figure out how to handle them. New Zealand is one of the countries that is still trying to decide what to do about cryptocurrencies. This article will examine how New Zealand deals with crypto taxes and what taxpayers need to know.
Crypto Tax Guide New Zealand
Normal application of income tax
Cryptocurrencies have seen an increase in value in recent years. As of January 2018, the total value of all cryptocurrencies was over $800 billion. This increase in value has led to increased scrutiny from tax authorities worldwide. For example, in New Zealand, income tax will typically apply to the sale of cryptocurrency.
The New Zealand Inland Revenue Department (IRD) has released guidance on how it will treat cryptocurrencies for tax purposes. The IRD says that cryptocurrencies will be treated as either property or currency for tax purposes.
Application of GST on Crypto
The application of GST on cryptocurrency in New Zealand has been the subject of much discussion in recent months. As a result, the Inland Revenue Department (IRD) released a guidance paper in March 2018 that clarifies how GST should be applied to cryptocurrencies.
Under the current legislation, GST applies to supplies of cryptocurrency made in New Zealand or offshore. If you are making a supply of a cryptocurrency, you must charge GST if you are registered for GST, and you must include the GST amount in your invoice.
What Are Crypto Assets?
Anything with cryptographical value is known as a crypto asset. Crypto assets include
- Payment tokens
- Virtual currencies
- Utility tokens
- Digital financial assets
- Security tokens,
- Digital tokens.
All these crypto assets are generally treated as property for tax purposes in NZ. Any losses or gains from the sale of crypto assets must be included in your taxable income. If you hold crypto assets as an investment, you can claim a deduction for any expenses incurred in acquiring or disposing of them.
Crypto Asset Income Tax As A Business Entity?
| Nature of business | Tax rate |
| Majority of organizations | 28% |
| Māori associates | 17.5% |
| Non-profit organisations registered under the Incorporated Societies Act | 28% |
| Trusts and trustees | 0% |
| Trusts and trustees | 33% |
Crypto Asset Income Tax As An Individual?
| For a dollar of income | Tax rate |
| From $1 up to $14,000 | 10.5% |
| From $14,001 up to $48,000 | 17.5% |
| From $48,001 up to $70,000 | 30% |
| From $70,001 up to $180,000 | 33% |
| Over $180,000 | 39% |
Deduction of Crypto Fees From Tax Amount
Cryptocurrency investors are often faced with the question of whether or not they can deduct their crypto-related fees from their taxable income. The answer to this question is yes. You can deduct your crypto fees when calculating your tax liability.
For example, if you trade cryptocurrencies on a platform that charges you a fee for each transaction, you can deduct that fee when calculating your taxable income. This is true regardless of whether the price was paid in cryptocurrency or fiat currency.
In addition, if you incur costs related to mining or acquiring cryptocurrencies, you can also deduct those costs when calculating your taxable income. However, there are a few limitations to this deduction. For example, you can only deduct expenses for generating or acquiring cryptocurrencies. Costs such as electricity and hardware purchases would typically qualify for this deduction, but things like food and rent would not.
Wrap Up
The taxation of cryptocurrency and crypto assets in New Zealand is still in flux. While some guidelines are in place, there is still a lot of ambiguity surrounding the tax treatment of these assets. This could lead to taxpayers’ confusion and create an opportunity for aggressive tax planning.