Tax Obligations for Cryptoassets

Cryptoassets have become increasingly popular lately among individuals. They are defined by IRD as “cryptographically secured digital representations of value that can be transferred, stored or traded electronically. They use some form of distributed ledger technology such as blockchain.” An example of a cryptoasset that you may have heard of recently are cryptocurrencies like Bitcoin, Litecoin etc.This new form of asset that’s emerged in our digital age has been recognised by IRD as a taxable form of income, so it’s important for individuals and businesses to be aware of their tax obligations if they are involved in acquiring or disposing of cryptoassets.

In terms of selling, trading or exchanging cryptoassets, most of the amounts you get from doing so are taxable. You may need to pay tax if you are obtaining cryptoassets for the purpose of selling or exchanging, trading your crypto assets, or using them to make some sort of profit. If you make a loss when selling cryptoassets, you may be able to make a claim on this loss as well.

Mining cryptoassets can also be taxable. If you’re in the business of mining cryptoassets, earn an income for your mining services, mine cryptoassets for the purpose of selling or exchanging for profit, then you may have to pay tax. Mining cryptoassets could be a business, a profit-making scheme, ordinary income or as someone’s hobby. Even through these different ways, you would most likely need to pay tax if you sell your cryptoassets if you mined them for the purpose of selling. Similarly to regularly selling, trading or exchanging cryptocurrency, what matters is your purpose.

IRD have all the information you would need to know about cryptoassets and whether you would have to pay tax based on your activity. Head over to their website, where the information from this blog was sourced: https://www.ird.govt.nz/cryptoassets/individual