CRYPTOCURRENCIES: IRD TAX TREATMENT; FRAUD WARNINGS
TAX TREATMENT OF CRYPTOCURRENCY
IRD has advised that cryptoassets e.g. bitcoin, ethereum etc, are treated as a form of property for tax purposes. You can read all about it here. The main points (so far) are:
- For tax purposes, cryptocurrency is property, not currency. This means foreign currency gain or loss provisions do not apply.
- Not all cryptocoins are the same, so you need to be aware of the characteristics and nature of each in order to determine the correct tax treatment.
- Cryptocurrency received as payment for goods or services is business income, which is taxable. This is seen as a barter transaction and you’ll need to calculate the value of the cryptocurrency in NZD at the time it’s received.
- Cryptocurrency is considered property for income tax purposes. So that means that the proceeds you make from selling it are very probably taxable.
- Cryptoassets are not subject to GST when they are bought or sold, but do have GST implications when they are received as payment for normal business activities
- Cryptoassets are not financial arrangements.
We believe that if you hold (or “hodl”) crypto and stake it in order to earn crypto-rewards (usually more crypto), then the crypto itself functions much like a term deposit. Therefore, the sale of said crypto at some future point is arguably not a taxable event.
CRYPTOCURRENCY FRAUD WARNINGS
NZ Police in association with City of London Police released a warning. See below for the PDF.
Apparently, fraudulent websites alleging to offer cryptocurrency investments are dishonestly using the image of Martin Lewis, the founder and editor for moneysavingexpert.com, as an endorsement for their companies. However, Martin doesn’t do adverts. See his blog post for more info here. These sites are also falsely stating that Dragons Den back their schemes.
- Don’t assume it is authentic just because it looks good
- Don’t rush into any investment, including cryptocurrency
- Consult a financial advisor
More info is available at NetSafe, especially re scams. And, just for the record, we don’t claim any endorsement by Martin Lewis, his website, NZ Police, City of London Police or NetSafe. Any copyrights belong to their legal owners. We are merely making you aware of what is going on out there. Keep safe!