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Cryptocurrency Purchased to Earn an Income – Part 1

Update (March 2021): We have recently submitted binding rulings with IRD on the position outlined below (further reading here). At this point in time, tax-free capital gains from cryptocurrency are unlikely. A potential tax-free position requires the taxpayer to show clear and compelling evidence that cryptocurrency was not acquired for the intention of disposal. The onus of proof is on the taxpayer to do so.This series of articles is about cryptocurrency purchased with the intention t...

Cryptocurrency Purchased to Earn an Income – Part 2

Update (March 2021): We have recently submitted binding rulings with IRD on the position outlined below (further reading here). At this point in time, tax-free capital gains from cryptocurrency are unlikely. A potential tax-free position requires the taxpayer to show clear and compelling evidence that cryptocurrency was not acquired for the intention of disposal. The onus of proof is on the taxpayer to do so.This article is part 2 in our series about cryptocurrency purchased with the i...

IRD Cryptocurrency Update

IRD have made an overhaul to their cryptocurrency guidance. Their updated information can be found here.In summary, there are no significant changes or updates to the taxation of cryptocurrency, however the guidelines do provide some (but limited) clarity about staking tokens – purchased with an intention to earn an income stream. We have reviewed this position in a separate article published here....

Transferring Cryptocurrency Between Wallets or Exchanges

A transfer of a cryptocurrency token from one wallet to another, or from a wallet to an exchange (or vice versa) is not a taxable event.Before and after a transfer, the cryptocurrency token is owned (and controlled) by the same person. The owner has control of the public and private keys of a cryptocurrency wallet and/or control of the tokens once deposited on an exchange.A taxable event is when the token is disposed – when ownership of the token ceases. A disposal can occur when the...

Keeping Cryptocurrency Tax Records

You need to keep records for your cryptocurrency activity.Having a system for keeping accurate tax records, and storing them in an organised way will make it more efficient to prepare financial statements, answer queries from IRD, provide information to banks or other corporations and meet anti-money laundering (AML) requirements such as proof of wealth.This article outlines:Why you need to keep recordsWhat records you need to keepA system for keeping recordsStorage optionsPractical recommendati...

Trade a Cryptocurrency Token for Another – A Taxable Event

A shoe shop sells a pair of shoes to a customer – a taxable event. The difference between the sale price to the customer, and the cost price from their supplier, is profit.Like the shoe shop, the sale of a cryptocurrency token is also a taxable event. The sale of a token can occur like a retail transaction (the seller receives $NZD), or, it can be a trade for a different token (the seller receives another cryptocurrency). In both situations the difference between the sale price and the cost pr...

Cryptocurrency End of Year Tax Guide

This article outlines our:1. Tax Summary for Cryptocurrency2. Cryptocurrency End of Year Checklist3. How we can help as cryptocurrency accountants and tax advisersIf you have any questions, please don’t hesitate to get in touch...

Cryptocurrency GST & Financial Arrangements – IRD Update

IRD have released a consultation paper about an exclusion of GST and financial arrangements to cryptocurrencies.In summary, IRD propose to exclude GST and financial arrangement rules from cryptocurrency retrospectively from 1 January 2009.This is positive news for New Zealand cryptocurrency taxpayers. IRD addresses the most pressing cryptocurrency tax issues we have previously discussed with them. It appears they have listened and understood taxpayers concerns with existing tax le...

Cryptocurrency Tax Loss Harvesting

Understanding the tax consequences of selling cryptocurrency is an important aspect for cryptocurrency investors.The sale is a key event which crystallises a taxable gain or loss.Until the sale, the gain/loss is “on paper” (or online), telling you how much your token is worth; this is known as an unrealised gain or unrealised loss.This article outlines further information about cryptocurrency tax loss harvesting, along with examples and a strong warning for individuals who apply this techniq...

Changing from Trading to Holding Cryptocurrency

After the peak of the cryptocurrency market in 2017, many individuals were actively involved in trading cryptocurrency. The market was increasing at a rapid pace and there was significant hype surrounding cryptocurrency. Individuals would be trading multiple tokens, using multiple exchanges, investing significant time, effort and capital, spend free time researching trading methods and reading white papers; all characteristics of a trading activity (in business).After 31 March 2018, we have noti...

Trading or Holding – Cryptocurrency Tax Implications

Trading and holding cryptocurrency are two common activities. They have many similar characteristics and profits from each activity will generally result in taxable income.This article will outline the different characteristics between trading and holding cryptocurrency, along with outlining the different taxation treatment. Finally, we include practical recommendations to consider.It is important to remember that each individual trade between two different tokens is considered a taxable event (...

Tax implications on gifting and receiving cryptocurrency

Christmas is coming and from the recent emails we’ve been receiving it sounds like Santa may be delivering cryptocurrency this year.This article will explore the tax implications on gifting and receiving cryptocurrency....

Cryptocurrency and GST in New Zealand

This article has been updated on 1 November 2021 and GST legislation is changing to remove GST from cryptocurrency. Please refer to the updated article here.The purpose of this article is to highlight cryptocurrency Goods and Services Tax (GST) risks and uncertainties. Specifically, how New Zealand taxpayers involved in cryptocurrency are disadvantaged due to existing GST legislation.We have requested further information and clarification from Inland Revenue Department (IRD) about thei...

Cryptocurrency Tax Update – October 2019

I recently had a phone call with Inland Revenue (IR) discussing common cryptocurrency tax situations we are experiencing. The purpose of the phone call was to discuss these common situations, how we are preparing cryptocurrency financial statements and calculating taxable income. We also discussed the difficulties that cryptocurrency (and digital international assets) brings and how IR guidelines could be improved for these situations. We are expecting IR to release updated cryptocurre...

Tax Treatment of Capital Assets in Cryptocurrency Mining

We’ve recently been asked to discuss the tax treatment of capital assets purchased for cryptocurrency mining. In most situations capital assets (such as computers or graphics cards) are used 100% for the cryptocurrency mining operation and depreciation is claimed. The below examples considers a more complex (but frequent) situation and we have outlined the tax treatment and consequences to be aware of.“Hi Tim, I have a large monthly power bill because of my cryptocurrency mining operation. I...

Migrating to New Zealand with Cryptocurrency – A Temporary Foreign Tax Exemption

Update October 2021. Although the same general principles apply, some of this earlier article is now out of date. We have recently published an online learning course for new migrants and New Zealanders returning to NZ after being away for 10 years. Check it out here.A New Zealand tax resident normally pays tax on their world-wide income. However, for new migrants arriving to New Zealand, there is a temporary tax exemption on foreign income. If you qualify, you do not pay tax on your foreig...

Lessons from the 2017 bull run – from a Cryptocurrency Accountant

Bitcoin is up 52% this month (so far today). This reminds me of the bull run during late 2017 where checking the blockfolio app on my phone was as addictive as cocaine.Currently we are seeing bitcoin dominate; compared to 2017, when bitcoin, altcoins and ICO’s all increased in significant value on daily basis.We have outlined below fundamental cryptocurrency tax consequences to be aware of which some taxpayers learnt after the 2017 bull run....

Bitcoin Taxes Podcast

Tim Doyle, a Chartered Accountant, joins us to discuss how cryptocurrency taxation is handled in New Zealand. Tim’s been an accountant for over 10 years, and has honed his focus to cryptocurrency taxation for the past couple years. Tim shares some excellent information that will be useful to any New Zealand crypto enthusiast, and sheds some light on the global differences of crypto taxation.If you are a crypto trader in New Zealand, you’ll definitely want to tune in! Be sure to check out our...