Inland Revenue (IR) is reminding investors of crypto-assets that they need to get tax compliant now, so they don’t end up with an expensive surprise down the line.
Inland Revenue has identified 355,000 unique crypto-asset users in New Zealand, undertaking around 57 million transactions, with a value of $36 billion.
Crypto-assets are treated as a form of property for tax purposes and what people make from selling, trading or exchanging crypto-assets is taxable. Any profit made is treated as income, added to other annual earnings, and taxed within a person’s regular income tax bracket.
If people are making money from crypto-assets they should be thinking about their tax obligations on this income and the risks of not declaring all related taxable activities.
Access to increased data has allowed IR to identify people with significant crypto-assets and New Zealand is now implementing the Crypto-Asset Reporting Framework (CARF).
Through CARF and annual exchanges of information with other tax authorities, IR will also receive information on transactions and transfers of crypto-assets that take place overseas by New Zealand tax residents.
Overall, the CARF initiative brings much needed visibility to the crypto world, shifting from being a vague grey area to international transparency with much tighter enforcement.
Inland Revenue will be matching the information to tax returns and following up on any discrepancies. Despite popular thinking – people are not invisible on blockchain, and we have the tools and the analytics capabilities to identify and expose crypto-asset activities.
A first batch of letters has now been sent to people who would normally have their tax assessed automatically and who Inland Revenue knows have traded on one or more crypto-asset exchanges.
The letter is the opportunity for people who received income from disposing of crypto-assets (including when they are sold, swapped, or exchanged) to review their tax position and correct any errors by filing an Individual income tax return - IR3.
There is more information at Declare cryptoasset income or a loss. Where necessary, people can also seek advice from an independent tax advisor.