Who’s hot, who’s not? Based on guidance issued today, those who trade in cryptocurrency and do not pay tax on gains are looked upon unfavourably by the IRD.
The IRD has published a Q&A page detailing its views on a number of issues relating to the tax treatment of gains and losses attained through cryptocurrency trading. The IRD has explicitly stated that it views cryptocurrency as property rather than as a currency. The key takeaway from this publication is that if you have turned a profit from your crypto trade, you may be liable to pay tax based on any gain.
This declaration is not a surprising nor novel view. In 2014, the United States’ IRS declared that it viewed cryptocurrency as property. What has come as a surprise to more novice traders is the news that their earnings may be taxed. One infamous Reddit post out of the US summed up the conundrum: an office assistant with an annual salary of US$47k was hit with a US$50k tax bill after selling Bitcoin at its peak.
This IRD guidance is a must read if you are a New Zealand resident cryptocurrency trader and/or you or your business receives or makes payments via a crytpocurrency.
Given the timing of the IRD’s publication – just days after the end of Financial Year 2018 – it would be prudent to analyse your crypto wallet and make sure your affairs are in order.
Cryptocurrency is treated as property for tax purposes. There are no special tax rules for cryptocurrencies – ordinary tax rules apply.