Taxing the Digital Frontier: Navigating Cryptoasset Taxation in New Zealand

As cryptoassets become increasingly mainstream, tax authorities around the world are sharpening their focus on compliance, and New Zealand is no exception.

Inland Revenue (IR) has issued detailed guidance clarifying how cryptoasset transactions are taxed, and has signalled growing enforcement. For international tax professionals and advisers, understanding New Zealand's approach is essential in advising globally mobile clients and cross-border investors.

IR's General Approach: Revenue, Not Capital

New Zealand treats cryptoassets as property, not currency, and applies ordinary income tax principles. According to IR, most cryptoasset gains are to be treated as revenue in nature rather than capital. Inland Revenue’s current guidance is:

"In most cases, you will pay tax on any profit you make from selling, trading or exchanging cryptoassets, because you acquired them with the intention of selling them."

Because New Zealand does not have a broad capital gains tax, the distinction between revenue and capital hinges on intention at the time of acquisition. In practice, IR presumes that crypto is acquired for the purpose of making a profit, be selling at some point. As such, unless the taxpayer can provide compelling evidence to the contrary, gains from crypto disposals are generally taxable.

A rare exception may exist for certain NFTs acquired for personal enjoyment rather than profit. But fungible cryptocurrencies (like Bitcoin or Ethereum) are almost always treated as revenue account items, according to IR.

We do not necessarily agree that this view held by IR is in order. We have seen many crypto investors who have never sold a single Bitcoin and held the asset for over 10 years. The subjective test remains intention at time of acquisition. We advise our clients to be very clear around this and be prepared to challenge IR. Until such time there is a test case, the tax position on crypto will hinge on whether an investor would want to take on IR or otherwise. 

Common Crypto Activities and Their Tax Treatment

1.    Trading and Investing:

• Disposals (selling, trading or using crypto) are taxable events.
• Gains are income; losses should be deductible if the original intention was resale.
• Crypto-to-crypto trades are treated as disposals, with gains calculated in NZD.

2.    Staking and Rewards:

• Staking rewards, crypto interest and airdrops are taxable upon receipt, based on their NZD value at the time.
• If those tokens are later sold, a further gain or loss is recognised.

3.    Mining:

• Block rewards and transaction fees are taxable income.
• Larger mining operations may be considered a business, requiring GST registration. Mining services to overseas networks are generally zero-rated.

4.    NFTs:

• Profits from creating or trading NFTs are usually taxable.
• If acquired purely for personal use, any gain on resale may be non-taxable (evidence is key).
• NFT creators selling to offshore buyers may zero-rate sales for GST purposes.

Challenges and Pitfalls for Taxpayers

• Proving Non-Taxable Intention: Requires detail and delicate management supported by evidence. Long-term holding or lack of frequent trades does not automatically prove capital treatment according to IR. This point will need to be tested in the courts specific to crypto. 
• Record-Keeping: IR requires detailed records for all transactions, including dates, values in NZD, wallet addresses and transaction types.
• Valuation: All transactions must be converted to NZD at the time they occur. Methods like FIFO or weighted average cost are permitted; LIFO is not.
• Cash Flow Issues: Tax is often payable on crypto received (e.g. staking rewards) even if it hasn’t been converted into fiat.

Enforcement Activity and IR’s Growing Focus

IRD has become increasingly active in the crypto space:

• Letters have been sent to taxpayers suspected of underreporting crypto holdings and thus income, based on IR interpretation.
• Data has been gathered from NZ based and offshore exchanges.
• IRD estimates over 227,000 New Zealanders have engaged in crypto transactions.
• In 2024, IRD reiterated that they are actively pursuing taxpayers involved in cryptoasset transactions who have failed to report their income. Warnings have been issued that this is a "final opportunity" to disclose before penalties and enforcement action commence.

The Global Outlook: OECD’s Crypto-Asset Reporting Framework (CARF)

The OECD's proposed CARF regime introduces automatic exchange of information for cryptoassets similar to the Common Reporting Standard (CRS) for bank accounts. Although not yet implemented in New Zealand, IR has expressed support for CARF and signalled alignment in the near future.

In August 2024, the New Zealand Government introduced the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Matters) Bill, which includes provisions to implement CARF. Under the proposal, from 1 April 2026, New Zealand-based Reporting Cryptoasset Service Providers (RCASPs) will be required to collect and report information on relevant transactions. The first global exchanges of data are expected to begin in 2027.

This development underscores the move towards global transparency. Once in place, information on New Zealand tax residents’ crypto holdings and activities, whether domestic or offshore, will be automatically shared with IR.

Cross-Border Considerations for Advisers

Advisers working with internationally mobile clients should consider:

• Tax Residency: NZ residents are taxed on worldwide crypto income. Transitional residency may offer temporary relief for new migrants.
• Double Taxation Risks: Coordinating between jurisdictions with different crypto tax treatments is crucial.
• Voluntary Disclosure: Advisers should act now to help clients disclose past omissions while penalty relief is still available.

In summary, crypto is no longer a regulatory grey area in New Zealand, at least from an IR perspective. IR expects full compliance and has the tools to enforce it. For advisers, the key lies in early planning, proactive disclosure and clear documentation. As global transparency increases, the cost of non-compliance, both financial and reputational, will only grow.

Talk to Andersen NZ's tax advisory team for assistance navigating these growing compliance demands.