A common belief among crypto investors is that the blockchain provides all the records you need for tax reporting. After all, every transaction is permanently recorded, right?
While the blockchain does record transactions, it doesn’t capture the full information required by the Inland Revenue (IRD). The blockchain shows what happened, but not necessarily when, why, or at what value in New Zealand dollars. The blockchain records can also be very difficult to understand and for us to analyse, process, and use to prepare your financial statements.
A bank statement shows the date of the transactions, the amount, to whom it was paid, and sometimes a description. For example, on 12 May 2025, $125.89 could have been paid to Paper Plus. It would be quite easy for us as an accountant to determine that you’ve purchased some office supplies on this date. The bank statement would also show the closing bank account balance.
On the blockchain, the date of the transaction is recorded as “X days ago”, and we might see a quantity of cryptocurrency leaving a wallet, we have no idea who it has been paid to (is it a transfer to another wallet – and who owns that wallet – you, an exchange), and what are receiving in return for that payment; i.e., is it an exchange for another token, is it just a payment for a good or service you are buying. And what is the closing balance of that token in your wallet?
To make it more complicated, you may have some SOL in your wallet, but some SOL on say Binance exchange, and more SOL on another wallet or exchange. For accounting purposes, all those wallets/exchanges and transactions need to be combined together, as part of a weighted average cost calculation method.
What We Need (That the Blockchain Doesn’t Always Show)
To properly complete your tax return, Inland Revenue expects you to maintain:
Descriptions of the transaction type (buy, sell, swap, earn, gift, etc.)
Who you sent the cryptocurrency to?
What did you send?
Why did you send it?
Parties involved, especially for OTC deals
Associated expenses or fees
Source documentation, including screenshots, contracts, or CSVs from exchanges
Bank account statements of fiat transactions
They may also ask where the fiat has come from to make the cryptocurrency acquisition.
If you can’t provide this, IRD may estimate your income, and their assumptions may not favour you.
Why It Matters for High-Value Investors
If you hold a significant amount in crypto, your activity is likely to attract greater scrutiny. Accurate records help:
Defend your position in the event of an audit
Avoid underreporting penalties
Support your tax position (especially in grey areas)
Track cost bases for income tax calculations
We help clients implement proactive crypto record-keeping strategies, using simple systems and methods combined with custom-built spreadsheets to simplify compliance.
Final Word
Don’t rely on the blockchain alone. Treat your crypto records like you would business accounts—with detail, structure, and professional oversight.
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Contact Us
Contact Tim Doyle for a call or meeting to discuss any cryptocurrency tax or accounting questions. Our office is in Cambridge, Waikato, or we can arrange a video conference call.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
