Inland Revenue urges crypto-asset investors to become tax compliant

Crypto-asset users in New Zealand are being urged by Inland Revenue to review their tax position and declare any profit made. Photo / 123rf

Inland Revenue has begun sending letters to Kiwis who have traded on any crypto-asset exchanges as it warns investors to become tax compliant or get an expensive surprise.

The tax agency said it has identified 355,000 unique crypto-asset users in New Zealand, undertaking around 57 million transactions, with a value of $36 billion.

“Crypto-assets are treated as a form of property for tax purposes and what people make from selling, trading or exchanging crypto-assets is taxable,” Inland Revenue said.

“Any profit made is treated as income, added to other annual earnings, and taxed within a person’s regular income tax bracket.

“If people are making money from crypto-assets they should be thinking about their tax obligations on this income and the risks of not declaring all related taxable activities.”

New Zealand is implementing the Crypto-Asset Reporting Framework (CARF), which was developed by the Organisation for Economic Co-operation and Development (OECD).

“Through CARF and annual exchanges of information with other tax authorities, Inland Revenue will also receive information on transactions and transfers of crypto-assets that take place overseas by New Zealand tax residents.

“Overall, the CARF initiative brings much-needed visibility to the crypto world, shifting from being a vague grey area to international transparency with much tighter enforcement.”

Inland Revenue said the letter is an opportunity for people who received income from disposing of crypto-assets (including when they are sold, swapped or exchanged) to review their tax position and correct any errors by filing an Individual income tax return (IR3).

“Despite popular thinking – people are not invisible on blockchain, and we have the tools and the analytics capabilities to identify and expose crypto-asset activities,” Inland Revenue said.