Key points for crypto investors

• Crypto is taxable – Inland Revenue treats crypto-assets as taxable property. Any realised profits from selling, trading or exchanging crypto are generally taxable and must be returned as income.  
• Significant activity in New Zealand – Inland Revenue has identified around 355,000 New Zealand crypto users across 57 million transactions, with a total value of approximately $36 billion.
• Increased data and tracking – Inland Revenue now has access to significantly more information, including offshore transactions through the Crypto-Asset Reporting Framework (CARF).
• Active compliance programme – Inland Revenue is already matching this data to tax returns and has started contacting taxpayers where discrepancies are identified.
• Common misconception addressed – Inland Revenue has been explicit – crypto transactions are not invisible and blockchain activity can be traced.

Inland Revenue has data and intent to enforce tax payments

From a practical perspective, this is less about a change in law and more about a shift in enforcement. Historically, crypto has operated in a space where compliance was inconsistent, in part due to limited visibility. That position is now changing quickly. Inland Revenue has both the data and the intent to follow up.

For many investors, the key risk is not aggressive tax positions, but incomplete records or a misunderstanding of what constitutes a taxable event (for example, crypto-to-crypto trades or use of crypto to purchase goods are both taxable events).

What you should be doing

If you have any crypto exposure, we recommend:

• Ensuring all transactions are captured and valued correctly.
• Reviewing whether past returns include all crypto-related income.
• Addressing any errors proactively before Inland Revenue does.

Early review is generally preferable to responding to Inland Revenue queries after the fact.  Making a voluntary disclosure in respect of incorrect or non-disclosed historic transactions can mean that shortfall penalties of up to 100% of unpaid tax can be eliminated.

If you have any questions relating to tax on crypto investments, or need advice on making a voluntary disclosure, we’re here to help. Contact your Baker Tilly Staples Rodway cryptocurrency advisor today.