Cryptocurrency is a rather new technology in the grand scheme of things, but that doesn’t prevent the asset class from being taxed by tax authorities around the world today. If you are a resident of New Zealand and wonder if your Bitcoin, Ethereum, or other crypto assets are subject to taxation, the short answer is yes. To make crypto tax reporting easier to understand for Kiwis, the Inland Revenue Department (IRD) has published tax guidance that addresses the topic of crypto taxation in more detail. In this complete tax guide, you will learn everything you need to know about how crypto is taxed in New Zealand, how much tax you pay on your crypto gains, how to calculate your crypto taxes, how to reduce your tax bill, how to file your crypto taxes to the Inland Revenue Department, and how to use a crypto tax calculator to generate all the tax reports you need.
Just a heads up! This guide is quite extensive due to the complex nature of cryptocurrency taxes. While we recommend reading this guide from A to Z the first time to make sure you don’t miss out on anything important, you can also use the menu navigation on the right side to jump to any specific crypto tax question later.
We are also updating this guide regularly based on the latest tax guidelines and statements from Inland Revenue in New Zealand. All updates will be listed below so that you can quickly see if anything has been updated since your last visit:
- August 7, 2022: The first version published
More specifically, these are the topics and questions we will address in this guide:
Let’s start with the most important question of all…
Do you pay taxes on crypto in New Zealand?
Yes, you need to pay Income Tax on your cryptocurrency gains in New Zealand if you acquired the assets with the purpose of disposing of them in the future. This means that profits from trading, exchanging, selling, or otherwise disposing of cryptocurrency are taxed at the same rate as your ordinary income. Crypto received from activities such as mining, staking, and airdrops also attract Income Tax in most cases. New Zealand has a progressive tax rate system and the tax rates vary from 10.5% to 39% for the 2021-2022 tax year depending on your total taxable income.
In the next section, we will look closer at how crypto is actually taxed in New Zealand.
How is crypto taxed in New Zealand?
While cryptocurrency as a whole has been around for over a decade now, New Zealand’s Inland Revenue Department started addressing the topic actively for the first time around 2017. Similar to most other countries today, the IRD does not consider cryptocurrency to be money. Instead, crypto assets such as Bitcoin and Ethereum are considered property for tax purposes. From a tax perspective, all cryptocurrencies, crypto assets, tokens, and other blockchain native assets are considered the same.
This means that although the IRD has published guidance addressing the topic of crypto taxes, there are in fact no crypto-specific tax rules in place today. However, this might change in the future as new legislation is currently being discussed to clarify the GST treatment among other things.
Here is what New Zealand’s Inland Revenue Department says about acquiring and disposing of crypto assets in the latest guidance:
If you acquire cryptoassets for the purpose of disposing of them you need to pay income tax on any profit you make. For example, if you buy or mine cryptoassets to sell or exchange them. If you make a loss when you sell your cryptoassets you may be able to claim this loss.The Inland Revenue Department
The key to understanding whether or not your crypto gains are taxed is if you acquired the cryptocurrency with the purpose of selling the coins later at a higher price. Most people who invest in cryptocurrencies have the intention of making a profit in the future and will in this case need to pay income tax. It also does not matter how long you plan to hold on to the coins before selling later – what matters is the purpose at the time of the acquisition.
So what are the practical implications of this for crypto investors in New Zealand? Well, the short answer is that in most cases, all gains from disposing of cryptocurrency are subject to Income Tax. The only exception to this would be if you acquired a cryptocurrency with a different purpose than disposing of it in the future or making a profit. One example could be that you bought a small amount of BTC to learn more about and understand the underlying technology better. In this case, you do not need to pay any tax even if the Bitcoin price appreciated from the time you acquired the asset until it was disposed of later.
Now that we understand the basics of how crypto is taxed in New Zealand, we will look at the income tax rates next to get an idea about how much tax we need to actually pay on our crypto gains.
New Zealand Income Tax rates
Contrary to most other countries, New Zealand does not tax gains on stocks, equities, property, or cryptocurrency with a capital gains tax. Instead, all profits from such assets are taxed similar to ordinary income at the Income Tax rate.
New Zealand has a progressive tax system which means that the tax rate increases as your income increases. For the 2021-2022 tax year, tax rates vary from 10.5% to 39% in New Zealand.
|For each dollar of income||Tax Rate|
|$0 – $14,000||10.5%|
|$14,001 – $48,000||17.5%|
|$48,001 – $70,000||30%|
|$70,001 – $180,000||33%|
Is buying crypto taxed in New Zealand?
Whether or not you are taxed at the time of buying crypto depends on which currency is used to acquire the crypto asset. If you have used a fiat currency such as the US dollar or New Zealand dollar, you are not taxed. However, if you have bought cryptocurrency and paid with another cryptocurrency, you have essentially also sold a cryptocurrency and you are therefore taxed on the gains on the asset disposed of.
Let’s break it down in more detail:
Buying cryptocurrency with fiat currency (Ex: NZD → BTC)
Buying crypto and paying with fiat currency is not a taxable event in New Zealand. If you have used an exchange like Swyftx or Easy Crypto to buy cryptocurrency with NZD, AUD, or another fiat currency, you do not need to worry about these transactions being taxed.
However, it’s important to keep track of all your purchases and complete transaction history so that you can calculate the cost basis correctly when you sell the purchased cryptocurrency in the future.
Buying crypto and paying with another crypto (Ex: DOGE → BTC)
The IRD is very clear in their crypto tax guidance that exchanging one cryptocurrency for another is a taxable event – as long as the asset sold was initially acquired with the intention of disposing of it in the future. This means that, in most cases, you need to work out the gains and losses each time you exchange two cryptocurrencies.
Further, the guidance states that the sales price should be accounted for in New Zealand dollars by looking up the market value of the cryptocurrency received. If you cannot value the crypto received at the time of the transaction, you can use the market value of the cryptocurrency sold instead.
Buying crypto and paying with stablecoins (Ex: USDT → ETH)
From a tax perspective, stablecoins are considered equal to any other cryptocurrency. This means that exchanging a stablecoin for another cryptocurrency is a taxable event in the eyes of the IRD.
Note that since most stablecoins are usually pegged to a fiat currency, your gains and losses from stablecoins will in most cases be determined by how the NZD value is changing over time. Or more precisely, how the NZD value has changed vs the underlying fiat currency of the stablecoin (typically USD) from the date you acquired the stablecoin and until it was disposed of.
Is selling crypto taxed in New Zealand?
Selling cryptocurrency is taxed in New Zealand because the Inland Revenue Department considers any disposal of a crypto asset a taxable event. The only exception to this rule would be a scenario where you acquired the cryptocurrency without the purpose of selling it or making a profit in the future.
Unless you can provide solid proof that the purpose of acquiring the cryptocurrency was not to dispose of it in the future, the safest approach for all crypto investors in New Zealand is to consider all transactions where a cryptocurrency is sold to be taxable events.
Selling cryptocurrency for fiat currency (Ex: BTC → NZD)
Selling cryptocurrency for fiat currency is a taxable event from the IRD’s perspective since you are disposing of a cryptocurrency. Any gains you have made will be taxed at the same rate as your ordinary income.
Selling crypto for another crypto (Ex: AVAX → BTC)
Selling crypto for another crypto is similar to buying crypto for another crypto and is therefore taxed in the same way. This means that you need to pay income tax on the profits during the tax year.
Taxes on crypto mining rewards
To simplify tax reporting for residents of New Zealand participating in cryptocurrency mining activity, the IRD has provided clear guidance on the tax treatment surrounding the mining of crypto assets in the latest revision of its crypto tax guideline.
In short, cryptocurrency received from mining is in most cases taxable and the mining service will also be subject to GST. However, the GST rate will be zero since the service is provided to a blockchain that does not have a physical presence in New Zealand.
How the cryptocurrency received from providing mining services is actually taxed depends on how the mining activity will be classified. Let’s look at the different situations in more detail:
Mining cryptocurrency as a hobby
The Inland Revenue Department classifies a hobby as an activity done mainly for “pleasure or enjoyment in your spare time”. Even though there are very limited circumstances that would qualify mining cryptocurrency to be considered a hobby, it’s still important to understand what the requirements from the IRD are.
In general, all of the following requirements must be fulfilled for the IRD to consider the activity a hobby:
- The activity must be conducted over a short time period
- The activity is not regular or business-like in any way
- The activity must require little to no planning or efforts
- The purpose of the activity must not be related to making a profit
- The purpose of the activity must not be related to selling the coins in the future
As we can see from this, most people who are mining cryptocurrency will most likely have a financial motive behind it, and the activity will therefore not be considered a hobby. However, if the IRD thinks that you are only mining crypto as a hobby, you do not need to pay tax on the crypto received. The sales proceeds are also completely tax-exempt if you decide to sell the coins in the future.
Mining cryptocurrency as a business
The IRD has stated that you are in a business if you are mining cryptocurrency regularly to make a profit. The most important deciding factors are how long you are mining for, the size of your operation, and how much time, effort and money you put in.
If you are considered to be carrying on a business-like mining operation, you need to pay tax on the mining rewards at the time you receive them in addition to tax on any profits made when disposing of the coins in the future.
More information about the factors the IRD looks at can be found on their website here.
Mining cryptoassets for ordinary income
How to differentiate mining crypto as a business from ordinary income purposes is not very clear. The IRD does not provide any specific factors used to determine whether the activity will be classified to be carried out for income purposes specifically. However, we can assume that it’s similar to carrying on a business-like operation, but on a smaller scale, using a less professional setup, and with less time, effort and money put into the operation.
Mining activity classified as ordinary income is in fact taxed in a similar way as mining as a business. This means that you will need to pay income tax on the mining rewards when you receive them, but also tax if you make a profit when you dispose of the coins later if you mined them for the purpose of selling or exchanging them.
Mining cryptoassets for a profit-making scheme
Mining activity classified as a profit-making scheme falls between a business-like operation and mining for ordinary income. The IRD mentions that if your main purpose for mining cryptocurrency is to make a profit, but if the operation is smaller in size and carried on for a short time, it may be considered to be a profit-making scheme instead of a business operation.
How are crypto assets received from mining as a profit-making scheme taxed? Similar to both business activity and mining for ordinary income, the mining rewards are taxed as income when you receive them in addition to any profits from selling the mining rewards at a later time in the future.
Crypto staking rewards taxes
The Inland Revenue Department includes cryptocurrency rewards received from verifying transactions in a Proof-of-Stake blockchain in the same tax bucket as mining rewards from Proof-of-Work blockchains. This means that cryptocurrency received as staking rewards is taxed as income at the time you receive the coins, but also taxed if you decide to sell the coins later and you make a profit.
Similar to cryptocurrency mining, staking will be considered either as a profit-making scheme, as a business operation, as ordinary income, or just a hobby. If the IRD considers your staking operation to be just a hobby, your rewards and also potential future profits from selling are completely tax-free, but keep in mind that there are very strict requirements for an operation to be considered just a hobby.
Are crypto airdrops taxed?
In New Zealand, cryptocurrency received as an airdrop is taxed either at the time of receipt, disposal, or both. What determines how the cryptocurrency is taxed comes down to the factors surrounding the operation and activity related to receiving the airdrop.
According to the IRD, an airdrop is generally taxed on receipt in these cases:
- Your cryptocurrency activity is considered a business
- You acquired the airdrop as part of a profit-making scheme
- You provided any services and received the airdrop in return for providing said services
- You receive airdrops on a regular basis
Cryptocurrency airdrops received that do not meet the criteria above will not be subject to income tax at the time of receipt. In such cases, the crypto asset received takes on a cost basis equal to zero so that the full amount is taxed at the time of disposal in the future – which brings us to the next question:
When is a cryptocurrency airdrop taxed at the time of disposal?
- Your cryptocurrency activity is considered a business
- You dispose of the airdrop as part of a profit-making scheme
- You provided any services and received the airdrop in return for providing said services
- Acquired the cryptocurrency with the purpose of selling it later
As we can see, there are quite many factors to consider when deciding whether or not the airdrop will be subject to taxation at the time of disposal.
To learn more about how airdrops are taxed in New Zealand, we recommend reading the publication QB 21/06 issued by the IRD that addresses this topic in more detail.
Income tax / Not taxed
Crypto margin and futures trading
One tax topic that has been debated heavily in the last few years is the taxation of margin and futures trading. While we won’t go into detail about how this type of trading works (read this article for more on that), there are a few important things to consider if you have traded cryptocurrency futures contracts or on margin by using leverage that we will explain in this section.
First of all, it’s important to understand that no regulatory framework exists surrounding the taxation of cryptocurrency futures or margin trading in New Zealand. In fact, there is even no mention of this in the cryptocurrency section of the Inland Revenue Department’s website. This means that the best we can do at this point in time is to study how other countries consider this type of transaction from a tax perspective, but also what the general consensus is among tax professionals. While we strongly encourage you to contact a tax advisor if you are in doubt about how to report your taxes, here is our general take on the topic.
Most exchanges that offer trading futures contracts will provide you with a history of the realized pnl from your trade history. The profits and losses will be in the settlement currency of the contract traded – usually USD, USDT or BTC. If you have made a gain of $1000, your account will be credited with $1000 after closing the position – this is your realized pnl. This gain will then be taxed as income at the time of receipt since the purpose of acquiring the asset was to make a profit. On the other hand, if you have made a loss, the amount will be debited from your account and will be considered a deductible loss that can be used to offset your other gains. This means that, in essence, you will only pay tax on the net gains you make from trading cryptocurrency futures contracts during the financial year.
Cryptocurrency margin trading shares some similarities with futures trading, but one important difference is that while trading futures contracts you are simply buying and selling synthetic contracts, you are in fact buying and selling the physical cryptocurrency when doing margin trading. Exchanges like Kraken and Bitfinex will provide you with a report of your realized pnl from all margin trade positions, and thus these transactions can most likely be considered similar to futures trading for tax purposes.
However, exchanges like Binance and KuCoin will only provide you with the actual trade history instead of the realized pnl. Because you are buying and selling cryptocurrency using leverage, you cannot calculate the gains and losses using accounting methods like FIFO directly without accounting for the borrowed assets. From our perspective, the most accurate way to calculate your gains is to incorporate the borrowed assets in your cost basis calculations if you are not able to calculate the realized pnl for each position in isolation.
Because futures and margin trading is such a complex tax topic from a legal perspective, we highly recommend consulting a tax professional or the IRD directly in case you have more questions related to this topic.
Other taxable transactions in New Zealand
We have so far covered some of the most typical transaction types in the crypto world. But there are also many other different ways to interact with cryptocurrencies that might trigger a taxable event in New Zealand. Below, we will comment briefly on the tax treatment of other transaction types not already mentioned.
Tax on hard forks
Similar to airdrops, a cryptocurrency received in the form of a hard fork may be taxable on receipt, disposal, or both. However, in most cases, the hard fork will not be taxed at receipt unless the cryptocurrency was acquired as part of a business activity or a profit-making scheme.
On the other hand, disposing of the crypto asset received from a hard fork will be subject to income tax in most cases. This is due to the fact that the original cryptocurrency was most likely acquired for the purpose of disposing of it in the future.
Income tax (depends)
Tax on ICOs & IEOs
The IRD has not provided specific guidance for the tax treatment of ICOs or IEOs, but since this is essentially similar to crypto-to-crypto transactions, we can treat such transactions similarly for tax purposes. This means that if you invest in a new token using BTC, ETH, or another crypto, you will need to pay taxes on the gains from the crypto asset disposed of.
On the other side, if you invest in an ICO or IEO and pay with a fiat currency directly, you do not need to worry about any taxes before you eventually sell the purchased tokens in the future.
Gifting cryptocurrency to a friend or family member is considered a disposal by the Inland Revenue Department. This means that gifting cryptocurrency is treated similarly to selling cryptocurrency from a tax perspective. It does not matter if you do not receive anything in return as it is still considered a disposal and therefore a taxable event.
Tax on received interest
Unfortunately, there is rarely a free lunch and the same applies in the cryptocurrency world also. If you are lending out your cryptocurrency on an exchange or DeFi protocol and are paid interest from the deposited collateral, the interest will be considered taxable income. You should report the value of the interest at the time of receipt using the fair market value of the cryptocurrency or fiat currency received.
Other crypto income
Have you received your salary partly or fully in a cryptocurrency instead of NZD? If so, you still have to pay income tax on the full amount similar to having your salary paid in New Zealand dollars directly.
If you are in doubt about what you need to report, your employer should provide you with a payment summary for each income year. You need to convert the value into NZD using price data from reputable exchanges on the day you received the cryptocurrency as salary.
Capital gains calculations New Zealand
So far in this guide, we have explained in detail which types of crypto transactions are taxed in New Zealand. Now that we know in which scenarios we need to calculate the resulting gains, the question remains how do we actually go about this?
To calculate capital gains in New Zealand, we need to first calculate both the selling price and purchase price of each cryptocurrency disposed of. The selling price, also called the proceeds, is simply the value of the crypto asset sold at the time of the transaction in New Zealand dollar. The purchase price, also referred to as the cost basis, should be calculated using either the First-in First-out (FIFO) or Average Cost Basis (ACB) method.
The Inland Revenue Department goes on to say that the same method should be used consistently from year to year. Another important detail is that the Last-in First-out (LIFO) method is not allowed to use in New Zealand.
We can now define the general formula for calculating capital gains as:
capital gain = selling price – purchase price
Using an accounting method such as FIFO is necessary to calculate the purchase price correctly if you have acquired multiple units of the same cryptocurrency at different times and at different prices. Using the FIFO method means we are selling the earliest acquired coins (or units) first and is also the preferred method in most other countries.
If you are not able to establish the purchase price, a conservative approach is to consider the value to be zero. However, this means that you need to pay tax on the full amount, and therefore more tax than you actually should.
Blake bought 0.2 BTC for $7,500 in December of 2021. Two months later, in February of 2022, he buys 0.3 BTC for $10,000. Blake owns now 0.5 BTC which he has paid a total of $17,500 for.
In March of 2022, Blake decides to sell 0.4 BTC while keeping 0.1 BTC as a long-term investment. He sells 0.4 BTC and receives $20,000 in exchange. His transactions can be seen in the table below:
The first thing Blake needs to do is to calculate the acquisition price of the 0.4 BTC sold using the FIFO method: $7,500 + 0.2 / 0.3 * $10,000 = $14,167.
Since we know the sales price was $20,000, we can find the resulting capital gains directly: $20,000 – $14,167 = $5,833.
The resulting table will look like this:
Let’s assume that these were the only gains Blake realized on his crypto holdings during the 2021-2022 tax year and that his total taxable income falls in the second tax band of a 17.5% tax rate. The total amount of tax he needs to pay on his crypto gains becomes $5,833 * 17.5% = $1,021.
How to reduce your tax bill
No one wants to pay more tax than they need to. While it’s not possible to avoid being taxed on your crypto gains completely, there are a few ways you can reduce your tax bill if you are paying taxes in New Zealand.
Most exchanges charge trading fees when you buy, sell, or trade cryptocurrency. You are also paying transaction fees in the form of gas when swapping cryptocurrency on a decentralized exchange such as Uniswap or Pancakeswap. Trading fees, or any other costs directly associated with the transaction, are considered costs that can be deducted from the sales price and are therefore fully deductible.
If you have a large number of transactions, deducting the trading fees can make a significant impact on your total tax liability. Most crypto tax solutions like Coinpanda do this automatically for you.
Deduct cryptocurrency losses
If there is something every crypto trader has experienced, it’s making a loss. While losses are part of the crypto game, it’s important to know that such losses can usually be used to offset your other gains. This means that you only pay tax on your net gains during the tax year.
If your total losses exceed your total gains during the tax year, or if you don’t have any gains to offset at all, you can carry forward the remaining loss to future financial years.
How to calculate crypto taxes in New Zealand
Calculating and reporting your crypto taxes to the Inland Revenue Department can seem like a daunting task at first. Luckily, there are certain tools that can be used to make the process a lot simpler.
Calculating your crypto taxes manually
Here are the steps you must take to calculate your crypto taxes manually:
- Download the transaction history from all exchanges where you have bought, sold, received, or sent any cryptocurrency. This includes also transactions from or to your own wallets.
- Calculate the cost basis for every individual transaction where cryptocurrency is disposed of
- Calculate the proceeds and resulting capital gains for all transactions that are considered taxable disposals by the IRD in New Zealand
- Identify all transactions subject to Income Tax by the IRD
- Summarize the calculations to find the total taxable amount during the financial year
Calculating your crypto taxes using crypto tax software
The best option for most people in New Zealand is likely going to be using cryptocurrency tax software to automatically do the required calculations. If you want to save both time and money, here is how you can use Coinpanda to sort out your crypto tax situation and generate all the required tax reports automatically:
1. Sign up for a 100% free account
It is 100% free to create a Coinpanda account and you don’t need to enter any credit card information to get started. The free plan lets you explore and use all features for free.
Sign up with Coinpanda for free now!
2. Connect all your exchange accounts and wallets
Coinpanda supports more than 500+ exchanges, wallets, and blockchains today. You can easily import all your transactions by connecting your exchange accounts with API keys or by uploading a CSV file with the transaction history. If you find that Coinpanda does not support an exchange you have used, reach out to us so we can add the integration – usually within a few days.
3. Wait for Coinpanda to crunch all the numbers
Get yourself a cup of your favorite beverage and wait for Coinpanda’s sophisticated calculation engine to crunch all the numbers for you. Coinpanda will automatically calculate the cost basis, proceeds, capital gains, and taxable income for all your transactions! This might take anywhere from 20 seconds to 5 minutes depending on how many transactions you have.
4. Check for any reported warnings
Coinpanda will automatically display a warning if it appears that one or more transactions are missing such that the cost basis calculations will not include the total purchase price. If you see any warnings, you should first double-check that you have in fact connected all your wallets and exchange accounts.
Do you still see any warnings? Fear not! We have written an extensive list of help articles that will guide you through the entire process of making sure your crypto tax reports are as accurate as possible. If you still need any help, the best way to get in touch with our customer support and tax experts is through the Live Chat.
5. Download your tax reports and tax forms
When you have successfully imported all transactions, the final step is to download the tax reports you need to file your taxes in New Zealand. Coinpanda’s tax plans start at $49 and you have lifetime access to all reports after upgrading.
New Zealand tax deadline
The tax year in New Zealand runs from April 1 to March 31 the following year. If you are completing your tax return for 2021/2022, you need to file your taxes by July 7, 2022. Remember that filing after the deadline can lead to penalties and fees.
After the tax year ends on March 31, you will receive either a tax assessment or a request to provide or confirm the information about your income from the Inland Revenue Department. Most letters are sent between May 28 and June 4 if you use myIR. In case you don’t use myIR, the letters will be sent later by post.
More information about the income tax return and the timelines at the end of the tax year can be found here.
Record-keeping of your crypto transactions
Having a good routine for record-keeping is essential for every crypto investor. The IRD states in their crypto guidance that there are certain standard record-keeping requirements all taxpayers in New Zealand need to meet. More specifically, these are the requirements set out by the IRD:
- Which cryptocurrency was part of the transaction
- The date of the transaction
- Type of transaction (acquisition, disposal, swap, etc)
- The number of units involved
- The value of the cryptocurrency in New Zealand dollars at the time of the transaction
- Total units of each cryptocurrency held at the beginning and end of the year
- Exchange records and other relevant statements
- Wallet addresses you possess the private keys of
The general rule is that the same record-keeping provisions are applicable for crypto assets as for all other taxable assets. In case you get audited by the IRD, you must be able to provide complete records of all your transactions. According to current tax law, you must retain the records for a minimum of seven years – even if you no longer own any cryptocurrency.
Many cryptocurrency exchanges keep these records for a limited time only, so you should make it a habit to periodically export and save this information. It is vital to keep good records to make it easier to work out your capital gains and meet your tax obligations. Coinpanda’s tax product can create a capital gains report with all of this information for you.
The IRD goes on to say that using an online crypto tax calculator such as Coinpanda may alleviate some of the challenges with crypto tax reporting. Coinpanda is fully compliant with New Zealand’s tax laws and can provide you with a complete tax report so you can be confident when filing your taxes.
How to file your crypto taxes to IRD
Once you have worked out your total taxable gains during the financial year, you have basically two options for filing your crypto taxes in New Zealand:
- Online using myIR
- Using paper forms
The most common and preferred way is filing your taxes online using myIR. Coinpanda can generate a fully compliant tax report with all the information you need when filing your taxes using myIR.
If you instead prefer to file your taxes using paper forms, you can download all forms and guides here.