DeFi & CRYPTO TAX IN NZ: WHAT YOU NEED TO KNOW ABOUT IRD’s NEW GUIDANCE

This paper sets out IRD initial views on how different DeFi (Decentralised Finance) transactions are taxed in New Zealand. This paper is not binding, but it strongly signals how IR is analysing common crypto behaviours. Submissions close 12 March 2026. [IRRUIP18 | PDF]

If you use crypto for anything beyond simple buy‑and‑hold, this guidance affects you. This article breaks down the key points—minus the jargon—so you can understand what IR is proposing and what it could mean for your tax return.

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1. The big message: DeFi often triggers taxable events you may not realise

IR’s core view is simple:
If you transfer your crypto to a place where you no longer hold the private key—for example a liquidity pool, a bridge, a wrapper, or a pooled staking contract—then you’ve disposed of that asset for tax purposes. Even if you “get it back later,” if you didn’t control it in the meantime, it was disposed of. Most DeFi activity works exactly like that.

A few examples of what IR considers a disposal:

• Sending tokens to a bridge or wrapper
• Providing liquidity to a pool
• Transferring tokens into pooled staking or liquid staking
• Providing collateral if the platform can use or pool the tokens
• Burning a wrapped token or LP token

A few examples of what’s not a disposal:

• Moving tokens between your own wallets
• Locking tokens in a section of your own wallet where you retain control
• Using an individual smart contract or vault not pooled with others

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2. Rewards = taxable income when you receive them

Whether you call it yield, interest, fees, or farming rewards… IR calls these “rewards” to avoid confusion with traditional interest.
Rewards are taxable when you receive them and can control them—that is, when they appear in your wallet or when you can claim them.

This applies across:

• Lending
• Liquid staking
• Pooled staking
• LP rewards
• Token emission from farming

Each reward must be valued at market value at the time received (converted to NZD).

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3. Why so many DeFi steps are taxable

When you dispose of a cryptoasset, tax law looks at why you acquired it. IR’s view: If you buy or receive tokens specifically to use them in DeFi, and that DeFi process requires a disposal, then your dominant purpose was disposal. That means income under section CB 4.

This applies even if disposing the token was just a “step” in a bigger plan—e.g., wrapping to bridge so you can stake on another chain. Disposal is still disposal.

IR notes that for many people, DeFi transactions will fall under:

• s CB 4 – property acquired for disposal, or
• s CB 3 – profit‑making undertaking or scheme

Crypto businesses may instead be taxed under s CB 1/CB 2/CB 5.

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4. Wrapping & Bridging: yes, IR sees these as disposals

Many people assume bridging is neutral. IR disagrees.

Here’s the flow:

1. You send ETH (or another asset) to a bridge.
2. That original ETH is locked.
3. A new asset (wrapped ETH on the target chain) is minted.
4. Later, you burn the wrapped token.
5. The original ETH is unlocked.

IR says this is:

• Disposal of the original
• Acquisition of the wrapped token
• Disposal of the wrapped token when burned
• Acquisition of the returned crypto

If the values at each step differ… so will your taxable income or loss.

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5. Lending & Liquidity Pools: often treated as sale–repurchase

When you “lend” crypto or deposit it in a liquidity pool:

• You typically lose ownership; others can use your tokens.
• You receive LP tokens or another right in return.
• Exiting usually requires burning those LP tokens.

IR treats this as a series of disposals and acquisitions.  Entry and exit can each result in taxable income or loss depending on market value. Rewards from the pool are also taxable on receipt.

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6. Borrowing Using Crypto Collateral

(One of the most misunderstood areas)

Collateral behaves differently depending on how the platform handles your assets.

Not a disposal

If the collateral stays:

• In your own wallet,
• In an individual vault,
• In a structure where the platform cannot deal with your tokens,

…then you haven’t disposed of it.

This is common on some centralised lenders where collateral is held in a credit wallet under your beneficial ownership.

A disposal

If the platform:

• Pools collateral
• Can rehypothecate (use) it
• Holds it in a way where you lose ownership control

…then IR says that is a taxable disposal. If liquidation happens later, that is also a disposal.

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7. Staking: pooled or liquid staking usually = disposal

IR distinguishes:

Solo staking (running your own validator)

• No disposal
• You keep ownership
• Rewards still taxable

Delegated or pooled staking

• Crypto is pooled
• You receive a staking or liquid‑staking token
• You lose control of the original asset
  → This is a disposal
  Burning the liquid token to unstake is another disposal.

Slashing

• Considered a disposal
• Generates a capital loss (no compensation)

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8. Good news: you won’t be taxed twice on staking/LP rewards

If you:

1. Receive rewards (taxable on receipt), then
2. Later dispose of those tokens,

IR says you can claim as cost the value that was taxed at receipt, preventing double taxation.  This is very helpful for stakers and yield farmers.

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9. Record‑keeping: what you MUST track

Inland Revenue emphasises detailed records, including:

• Transaction hash + wallet addresses
• Date/time
• What you sent, what you received
• Market value at the time (NZD)
• Gas/fees
• Why you acquired the asset (purpose)

Many DeFi tax calculators struggle with bridging, wrapping, LP token burns, and multi‑step flows. IR specifically asks for feedback on this.

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What this means for you

If you have only bought and held crypto, this paper doesn’t change much.

If you have done anything in DeFi, including:

• Providing liquidity
• Staking in pools
• Liquid staking
• Bridging between chains
• Wrapping assets
• Borrowing or lending crypto
• Farming rewards

…then IR’s position is that you may have had more taxable events than you realised.

This could mean:

• Additional income
• Additional deductions
• Re‑working past calculations
• Or both

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Our recommendations for clients

✔ Review your DeFi transactions for the last few years

Even simple actions like bridging can create taxable disposals.

✔ Use a calculator that can handle complex DeFi

If yours can’t handle wraps, LP tokens, or burns… it’s not enough.

✔ Document your purpose at acquisition

Purpose determines whether CB 4 applies.
This matters a lot.

✔ Talk to us early

We can help navigate these rules, clean up records, or prepare submissions to IR.

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Want help? We’re here.

So…DeFi & crypto tax in NZ: What you need to know about IRD’s new guidance. Do you feel better equipped now? Great. However, this is a complex area, and Inland Revenue’s interpretation may evolve. If you’re unsure how this affects your tax position please get in touch. We’ll help you stay compliant without paying a cent more tax than required.