Crypto Tax Guide — Taxation of Cryptocurrency and Digital Assets in NZ
the taxation of cryptocurrency and digital assets in New Zealand. The guide covers the IRD's approach to the crypto tax, the distinction between the revenue account and the capital account, the crypto-to-crypto transactions, the mining and the staking income, and the record-keeping requirements.
IRD Approach to Crypto Taxation
The IRD treats the cryptocurrency as the "property" for the tax purposes. The tax treatment depends on the nature of the activity. The revenue account treatment applies when the taxpayer is in the business of the crypto trading, the mining, or the dealing. The capital account treatment may apply to the long-term buy-and-hold investors. However, the IRD expects most crypto transactions to be on the revenue account, especially for the frequent traders who buy and sell with the intention of the profit. The crypto-to-crypto transactions are taxable events — the disposal of one crypto for another triggers the tax on the gain.
Mining, Staking, and Defi
The crypto mining income is taxed as the business income at the market value of the mined coins at the time of the receipt. The mining expenses (the electricity, the equipment, the internet) are deductible. The staking income (the "proof-of-stake" rewards) is also taxed as the income at the market value. The DeFi lending and the yield farming transactions may trigger the taxable events when the crypto is exchanged or the rewards are received. The IRD requires the taxpayers to keep the detailed records of each transaction, including the date, the type, the amount, the NZD value, and the transaction ID. The FIF rules do not apply to the crypto assets (treated as the property, not the foreign investment funds).