When you dispose of a cryptoasset you need to calculate your cryptoasset income from that disposal.
To calculate your cryptoasset income
Income = Sale Price – Purchase Cost – Transaction Fees
It can be difficult to determine the cost of your cryptoassets at the time you sell them. To work out the cost of disposed cryptoassets you can use 1 of the following methods:
- first-in first-out (FIFO)
- weighted average cost (WAC).
If you dispose of only part of a cryptoasset, calculate the cost of just that part.
Losses from disposals can offset other cryptoasset profits, and then other income.
Note: Unrealised gains/losses, that is assets you have not disposed of yet are not taxable or deductible.
Getting your data right
To ensure you can calculate your income correctly:
- include all wallets and platforms (New Zealand and overseas)
- correctly classify transactions, for example do not mistake transfers for disposals
- reconcile your holdings as of 31 March each year
- review Decentralised Finance (DeFi) transactions contract-by-contract - if you lose possession of your cryptoassets with a DeFi product, you have made a disposal
- document any manual corrections clearly.
To reconcile your holdings:
- confirm your end-of-year balances
- match fiat in/outflows to cryptoasset activity
- record cryptoasset-to-cryptoasset transactions as both a disposal and an acquisition.
Tools to work out your income
Income calculations can be complex. Tools like Koinly and CryptoTaxCalculator can help. However, we do not endorse any particular tool. Other tools are available — choose one that suits your needs.
These tools can import data using APIs or CSVs from wallets and exchanges, and generate income reports.
Record keeping for cryptoassets
The cost of cryptoassets if you are a miner or accept payment in cryptoassets
Sometimes you might have taxable income when you receive cryptoassets and again when you sell those same cryptoassets. This can happen if you are a miner or when you accept payment in cryptoassets.
If your cryptoassets are not trading stock, the cost you claim when you sell or exchange your cryptoassets is equal to the value of the cryptoassets at the time you received them.
If the cryptoassets you received become your trading stock (for example when you’re in business as a miner) you can claim a deduction for the cost of any mining rewards that are trading stock in the year the rewards are returned as income. This cost will be equal to the value of the cryptoassets at the time you received them.
Applying the trading stock rules is not easy. It’s a good idea to talk to an accountant or tax advisor. They can give you more information about how the rules apply to your situation.