1. In line with other jurisdictions, cryptoassets (‘crypto’) are treated as property for NZ tax purposes.
2. The intention at the time of acquisition governs how it will be treated for NZ tax purposes.
3. Crypto which is purchased with the intention to dispose of it will be taxable in NZ if the purpose of acquiring it is to dispose of it at the time of acquisition, and disposal is the dominant purpose of holding it.
Example 1: a NZ tax resident decides to dabble in crypto and is unsure about the whole thing. A buys a small amount to see what it’s all about, forgets about it, and then a year later remembers they have it, and sells it. Likely to be not taxable, because the purpose at the time of acquisition was not to dispose of it, but to dabble.
Example 2: a NZ tax resident decides to invest in crypto to make some money. Due to the volatile nature of crypto he/she decides to purchase and sell when the crypto has appreciated by 10%. This transaction is taxable in NZ because the purpose at the time of acquisition was to dispose of it.
4. Businesses receiving crypto as consideration for the provision of goods and/or services is viewed by Inland Revenue as a barter transaction and is taxable.
5. The NZ tax liability is determined by calculating the NZD equivalent of the crypto received on the date it is received.
6. The circumstances in which the disposal of crypto will not give rise to taxable income are limited.
7. In most scenarios, mining is directly towards making a profit, and so a business activity, versus a hobby, thus taxable.
8. BR Pub 23/04, BR 23/05, BR 23/06, and BR 23/07 address the NZ payroll, FBT, and employee share scheme implications of remuneration paid in crypto.
9. Crypto, and options to acquire crypto, are excepted financial arrangements. However, should an entitlement exist, to receive amounts during the ownership period, that are determined by reference to the quality or value of the cryptocurrency on a basis that is known to the owner in advance, there is a financial arrangement for NZ tax purposes.
10. NZ’s rules, albeit a variation of other jurisdiction’s rules, lead to the same outcome in the majority of cases, being taxable. This should provide some interesting developments to come, in the areas of foreign tax credit availability and source rules.
