IRD Cracking Down On Cryptoassets
Inland Revenue is declaring war on customers who are actively dealing in cryptoassets but not declaring income from them in their tax returns.
Cryptoassets, also known as cryptocurrencies or virtual currencies, are treated as a form of property for tax purposes. What people make from selling, trading or exchanging cryptoassets is taxable.
In 2020, IR updated its guidance on the tax treatment of cryptoassets in New Zealand. Last year they wrote to a group of high-risk customers and gave them the chance to fix any non-compliance issues before facing audit.
Inland Revenue spokesperson Trevor Jeffries says IR has just sent another round of letters.
“Data we have has helped us identify customers who are not paying their tax. That data is also now being used to identify customers with significant cryptoassets.
“Inland Revenue has identified 227,000 unique cryptoasset users in New Zealand undertaking around 7 million transactions with a value of $7.8 billion.
Cryptoasset values have reached new highs, so now is a good time for people to think seriously about tax on their cryptoasset activity. The high value also means customers are well positioned to pay their tax for the 2024 tax year and earlier.
Inland Revenue has long stated that cryptocurrency is often held for resale or trade, which means any gains on disposal are often taxable. “Disposal” of a cryptoasset has a wide definition, including exchanging one crypto asset for another, or using it to purchase goods or services.
A Regulatory Impact Statement issued by Inland Revenue in May 2024 underscores this stance. “In almost all cases, the disposal of cryptoassets is taxable in New Zealand. Disposals include selling cryptoassets for money, exchanging one cryptoasset for another type of cryptoasset and using cryptoassets to pay for goods or services.” This can often result in an unexpected tax bill for the person who disposed of the cryptoasset.
If people are making money from crypto they should be thinking about their tax obligations on this income and the risks of not declaring all related taxable activities.
To help with that, IR provides extensive guidance to help customers assess their situation. Where necessary, people can also seek advice from an independent tax advisor.
We want customers and tax agents to know that we are stepping up our compliance activities for customers with cryptoassets. Despite popular thinking – people are not invisible on blockchain, and we have the tools and the analytics capabilities to identify and expose cryptoasset activities".
“We are applying those analytics capabilities and using data received from exchanges, both here and overseas. IR has signed up to the cryptoasset reporting framework. That means New Zealand works closely with other tax jurisdictions and will get more data on customers’ cryptoasset transactions outside New Zealand.”
If you have cryptocurrency, it’s best to keep really good records of holdings and trades as the holder of the assets may owe taxes even if you have not generated any cash from these activities.
People use cryptocurrency for various reasons, often viewing it as a more secure alternative to traditional banking systems for transferring large amounts overseas. The Reserve Bank is now considering whether to issue a central bank cryptocurrency. This is an ongoing project as relevant issues require thorough consideration. This means any issue date, or decision, is likely to be several years away.
Inland Revenue has already made some changes to the tax rules to deal with cryptocurrencies. As part of this project, Inland Revenue and the Reserve Bank could consider whether any more changes are needed to make sure the tax rules are practical and workable as cryptocurrency becomes a bigger part of life in New Zealand.
What Should I Do If I have Cryptoassets?
Make an appointment with the Whutuporo team and discuss the tax implications and what you need to be doing to get your tax affairs in order to avoid Inland Revenue coming after you.
Cryptoassets, also known as cryptocurrencies or virtual currencies, are treated as a form of property for tax purposes. What people make from selling, trading or exchanging cryptoassets is taxable.
In 2020, IR updated its guidance on the tax treatment of cryptoassets in New Zealand. Last year they wrote to a group of high-risk customers and gave them the chance to fix any non-compliance issues before facing audit.
Inland Revenue spokesperson Trevor Jeffries says IR has just sent another round of letters.
“Data we have has helped us identify customers who are not paying their tax. That data is also now being used to identify customers with significant cryptoassets.
“Inland Revenue has identified 227,000 unique cryptoasset users in New Zealand undertaking around 7 million transactions with a value of $7.8 billion.
Cryptoasset values have reached new highs, so now is a good time for people to think seriously about tax on their cryptoasset activity. The high value also means customers are well positioned to pay their tax for the 2024 tax year and earlier.
Inland Revenue has long stated that cryptocurrency is often held for resale or trade, which means any gains on disposal are often taxable. “Disposal” of a cryptoasset has a wide definition, including exchanging one crypto asset for another, or using it to purchase goods or services.
A Regulatory Impact Statement issued by Inland Revenue in May 2024 underscores this stance. “In almost all cases, the disposal of cryptoassets is taxable in New Zealand. Disposals include selling cryptoassets for money, exchanging one cryptoasset for another type of cryptoasset and using cryptoassets to pay for goods or services.” This can often result in an unexpected tax bill for the person who disposed of the cryptoasset.
If people are making money from crypto they should be thinking about their tax obligations on this income and the risks of not declaring all related taxable activities.
To help with that, IR provides extensive guidance to help customers assess their situation. Where necessary, people can also seek advice from an independent tax advisor.
We want customers and tax agents to know that we are stepping up our compliance activities for customers with cryptoassets. Despite popular thinking – people are not invisible on blockchain, and we have the tools and the analytics capabilities to identify and expose cryptoasset activities".
“We are applying those analytics capabilities and using data received from exchanges, both here and overseas. IR has signed up to the cryptoasset reporting framework. That means New Zealand works closely with other tax jurisdictions and will get more data on customers’ cryptoasset transactions outside New Zealand.”
If you have cryptocurrency, it’s best to keep really good records of holdings and trades as the holder of the assets may owe taxes even if you have not generated any cash from these activities.
People use cryptocurrency for various reasons, often viewing it as a more secure alternative to traditional banking systems for transferring large amounts overseas. The Reserve Bank is now considering whether to issue a central bank cryptocurrency. This is an ongoing project as relevant issues require thorough consideration. This means any issue date, or decision, is likely to be several years away.
Inland Revenue has already made some changes to the tax rules to deal with cryptocurrencies. As part of this project, Inland Revenue and the Reserve Bank could consider whether any more changes are needed to make sure the tax rules are practical and workable as cryptocurrency becomes a bigger part of life in New Zealand.
What Should I Do If I have Cryptoassets?
Make an appointment with the Whutuporo team and discuss the tax implications and what you need to be doing to get your tax affairs in order to avoid Inland Revenue coming after you.
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