Inland Revenue guidance on cryptocurrencies says they are treated like property for tax purposes.
Inland Revenue Customer Segment Leader Tony Morris says trading in cryptocurrencies may happen in a digital realm but tax obligations still apply in New Zealand.
“Inland Revenue has responded to requests for guidance by issuing some common questions and answers on our website so that everyone knows their responsibilities," he says.
“Just like with property - when you acquire cryptocurrency for the purpose of selling or exchanging it, the proceeds you make from selling it are taxable.
“The purpose is hard to argue here since with Bitcoin and other cryptocurrencies, generally the only time they produce an income is when they change hands.”
Tax is also applied when one cryptocurrency is swapped for another. You don’t need to cash out to dollars to create a tax obligation.
Likewise, if you receive a cryptocurrency as payment for goods or services, this is considered business income and is taxable.
Tax rules for foreign exchange don’t apply when it comes to cryptocurrencies.
“It’s important to keep good records of your transactions as this information will be useful when filing a tax return,” says Mr Morris.
“Let Inland Revenue know if you think you haven’t got your past tax returns right so that it can be corrected.
“Operating in the digital world doesn’t absolve you from your tax obligations. It also doesn’t mean your activity is untraceable.”