"Despite popular thinking - people are not invisible on [the] blockchain, and we have the analytics capabilities to identify and expose crypto asset activities," Inland Revenue Department spokesperson Trevor Jeffries warns.
The warning comes as the IRD intends to scrutinise people who actively deal in crypto assets, but aren't declaring income from this in their tax returns. This isn't the first time the department has notified people that money from selling, trading and exchanging crypto is taxable: last year it wrote to high-risk customers to give them the chance to sort out any non-compliance issues before facing audits.
IRD has used its analytics tools to identify a substantial amount of crypto traders in New Zealand, some 227,000. They have undertaken around 7 million transactions, valued at $7.8 billion.
That crypto values have reached new highs means people are well positioned to pay their tax for the 2024 and earlier year, IRD said.
Even keeping transactions outside the country is unlikely to hide them from the IRD.
The tax department said it receives data from crypto exchanges in New Zealand and overseas, and has signed up to the OECD crypto asset reporting framework.
"That means New Zealand works closely with other tax jurisdictions and will get more data on customers' crypto asset transactions outside New Zealand," the department spokesperson said.
In June this year, exchange Easy Crypto said it has almost 250,000 investors. Easy Crypto said its research showed nearly half of all New Zealanders either own or are considering owning crypto currency, with more users in the under-35 age group.
Other investment platforms such as Sharesies, Hatch Invest and Kernel Wealth also offer exchange traded funds, a pooled investment security that can be bought and sold as individual shares.
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The tax department said it receives data from crypto exchanges in New Zealand and overseas, and has signed up to the OECD crypto asset reporting framework.
Honestly speaking, I think they're fighting an uphill battle to control the taxation of crypto. There are a range of different scenarios I can think of.
- Unless defi has some type of travel rule or KYC, then it's quite difficult to track who, what, how much has been traded. The US agencies are of course terrified by this.
- Different jurisdictions have different rules. For ex, a NZ citizen can legally be a tax resident of another jurisdiction where crypto tax doesn't apply. Dubai is a haven for crypto whales and successful traders.
- Crypto can be owned by different legal entities as opposed to individuals. For ex, it can be owned by limited liability companies that are not liable for tax in NZ.
Yes and then there is the use of Decentralized Exchanges (DEX). Making profit by buying and selling through an centralized exchange is one thing but swapping/converting to stablecoins or other crypto via a DEX is also a taxable event in theory. There are hundreds of DEX's out there i can almost guarantee are not reporting to tax authorities around the world. I don't even know how they could when they have no details on you and you do not have to register to use them like a CEX.
You're not quite right here, but of course it depends how in-depth IRD go with their digging. I will assume you are talking about Ethereum and not some obscure chain with anonymity. Everything on Ethereum is publicly available. For example, I can buy through Easy Crypto (this is reported to IRD, so IRD theoretically know my wallet address and how what tokens I have purchased), then do various Uniswap trades to USDC, WBTC, whatever - and all of that transaction data is freely available for anyone to view. What I am saying, is DEX's do not need to report to tax authorities, as all the data is publicly available. Now, whether IRD have the tooling available right now to scrape that data from the blockchain is anyone's guess. But it's just a matter of time, in my opinion.
Easy Crypto said its research showed nearly half of all New Zealanders either own or are considering owning crypto currency, with more users in the under-35 age group.
The problem with EC's research is that it's not representative and done by crude measurements such as cheap online panels. The Federal Reserve does a 'Report on the Economic Well-Being of U.S. Households'. The research shows approx 7% of h'holds own crypto - falling from previous years.
Directionally, EC's claims about young owning or wanting to own crypto makes sense. However, that same segment may not want to be so candid about owning crypto. Nothing to do with criminality. It's a privacy issue. Boomers might not get this.
https://www.federalreserve.gov/publications/2023-economic-well-being-of…
But but "I didn't mean to make a profit". It works for housing speculators...
It's an interesting argument. If someone holds rat poison to preserve their wealth from monetary debasement, they're not speculators. Similarly, property owners can use the same argument.
Should we be taxed on behaviors that protect ourselves from theft by govt agencies like central banks? I think most people like monetary debasement mainly because asset prices rise as a result.
14 years of data...best performing asset over that period...need some more info?
I think Jonesy is referring to store of 'value' (not wealth). But you are correct if you're suggesting that in terms of wealth generation, BTC has been phenomenal.
As for SOV, the water cooler consensus is that BTC is not a SOV because its fiat price is too volatile. Lord Orr confirmed this in one of his speeches.
If you take the counter position to the water cooler crew and Lord Orr, that's all very well. But pays not to push the issue. Chances are they haven't put in the work or zoomed out.
Yeah, I was countering the point that someone didn't want to gain value speculatively by holding Bitcoin, so shouldn't pay tax.
At no point in Bitcoins history has it held its value in any stable fashion vs CPI or the Big Mac Index or any other common way of measuring value over time. In fact it is designed to go up in value as the cost of mining increases over time (so long as there is still buyers).
It is like someone boarding a plane, and saying they didn't expect to leave the ground.
At no point in Bitcoins history has it held its value in any stable fashion vs CPI or the Big Mac Index or any other common way of measuring value over time.
On the contrary. Given that BTC has increased in fiat value by approx 100% pa over the past 14 years, it has more than held its value relative to CPI inflation. And if you included the Big Mac price in BTC in the BM index, variation would be wide. But over time, it's quite obvious that BTC has held its value compared to fiat currencies.
It's an interesting argument. If someone holds rat poison to preserve their wealth from monetary debasement, they're not speculators.
Bitcoin in NZD price has steadily increased 500% in the last five years. The average NZ wage in that time has increased 20%.
If your uncle Bill mentioned that performance to you and suggested you invest, would you assume you are getting it to a pure inflation hedge scheme to stop inflation eroding your savings, or a speculative investment?
I think gold is a SOV. But what would I know and I cannot empirically prove that it is any more a SOV than fiat currency. All depends on your assumptions and parameters.
But even I 'guess' it is, my intention and belief belong to me. Shouldn't matter what the ruling elite or other people think.
"...what's next you are going to tax me because I'm saving rent money"
You think not? Hold my beer
https://letstalkabouttaxnz.com/2016/12/18/imputed-what/
https://www.motu.ac.nz/our-research/wellbeing-and-macroeconomics/fiscal…
https://en.m.wikipedia.org/wiki/Imputed_rent
""Yeah but you don't put a million bucks into Crypto do you ?"
Is there a rule? $1 million in crypto is not much depending how far down the road one is. For boomers allocating 1% of their portfolio to rat poison, it's a lot. And for most boomers, trying to navigate crypto platforms is like a monkey flying a plane.
<2% of BTC addresses have more than 1 BTC. Top 20% of addresses hold approx 99% of mined BTC. For someone to have made USD1 mio from USD1K (w/out leverage), they would have had to buy in 2013 at latest. Mt Gox customers for ex.
Plenty of millionaires in the altcoin space, particularly Ethereum.
I'm filing mine, paying tax on gains that have never reached the dollar or this country's financial system. Paying tax on unrealized capital gains, meanwhile property boomers are milking millions tax free
Yet I know of many boomers raking in literally millions tax free on investment property that they only built to intend to sell.
"I have a ruling from the IRD because each of my family members lives in one of the 6 houses for 2 years, so when we sell them we are tax free".
Make that make sense. 10m+ tax free with intention to sell, vs 10k for a young person paying 33% without it ever being sold to NZD or disposed of for purchase.
Backwards country. Crypto gains are bringing dollars into NZ, property is recycling future labour today. Why are we taxing the one bringing wealth into the country?
What do you mean when you say "paying taxed on unrealised capital gains"? If you buy 1BTC and it 10x's but you don't sell (unrealised capital gains, in other words) then there has been no taxable event and you owe nothing. If you then swap that 1 BTC for 10 ETH, then you have triggered a taxable event. Still unrealised in a NZD sense, but alas, that's the way things work. I have been filing for the last 6 years. It was dicey playing catch up for 2017-2020, but now I use cryptotaxcalculator.io and it's a breeze. The annual CTC subscription can also be claimed as an expense against any 'profits'.
Making just about anything you do with crypto a taxable event seems the most absurd aspect to me (whereas vs property investment you just about have to beg and plead with the IRD to tax you it seems). Imagine how many people are out there who dabbled in a few trades here and there via some phone app during one of the crypto booms. Can't imagine they kept any records. Imagine how many people racked up big lists of trades before the IRD had published any guidance. Half those exchanges/crypto assets probably don't even exist any more.
Seems to me the easiest/fairest way to tax crypto would be to have investors calculate the realised cash position versus the cash investment in any given FY (e.g. last FY I invested $10,000 but cashed out $100,000) so you pay tax on the $90k difference. Simple for anybody to calculate, even if they've long lost access to an exchange or data from trades as you'd have references in Internet banking as I'd imagine many people are buying in and cashing out through a much smaller pool of 'end points'.
Instead you've got some weird scenario where the IRD might audit somebody and then be forced to spend significant time trying to trace through some dodgy exchange the gain/loss on trading Shiba Inu for CumRocket (yes, it's a real one).
Seems to me the easiest/fairest way to tax crypto would be to have investors calculate the realised cash position versus the cash investment in any given FY (e.g. last FY I invested $10,000 but cashed out $100,000) so you pay tax on the $90k difference.
Yes, but what if you don't "cash out" and simply exchange BTC for USD stablecoin. Should that be a 'taxable event'?
The realised cash position vs cash investment is the only sensible way to approach this. IRD rules will never keep up with crypto. Never.
Take staking as an example: native staking is not a taxable event as it is just a lock of funds into a smart contract (receiving staking yields of course is taxable). But liquid staking (which is relatively new) involves a token swap into an LST, and thus is technically a taxable event. This is utterly nonsensical, as the intent in both cases is the same, as is the under-the-hood functionality.
Try discussing these nuances with IRD.
The thing is what can you do with your USD stablecoin until you cash that out into real world currency e.g. actual USD, NZD or whatever? I suppose there might be some fringe cases where you could then use your stablecoin holdings as collateral against which to borrow (maybe that isn't even a thing?) but even if that could be done, it's no different in principle to borrowing against equity in your home and we don't tax the equity release do we?
I'd say the vast majority of crypto investors are in crypto to ultimately derive a 'real world' benefit. That benefit being a yellow Lamborghini with the licence plate 'HODL' or a debauched first class trip away with the side piece, or maybe something more modest like a new computer or paying off the mortgage.
Therefore, for simplicity's and compliance's sake it would be so much easier to tax the "intent outcome" (i.e. making cashola by trading TurdPepe for LuxoBucks, then trading that to BTC, then selling BTC to NZD) in the same way that's why we should tax all capital gains on resi investment property because if there is no yield capital gains must be why you were investing.
In other words how many investors traded (or continue to trade) between different crypto tokens because they actually care about the exchange rate between the two? It's all about turning your BTC into ETH into RabidDoge back into ETH back into BTC in order to start with $X and hopefully come out with $X plus.
There might be the odd person who is driven by a sole desire to have a store of wealth that can potentially protect in the event of a currency collapse or whatever, or the odd "true believer" who thinks that one day all exchange will be conducted with Bitcoin as the effective currency, but my anecdotal observation of crypto-related discussions (both online and offline) is the real name of the game is the hope that your 1 Bitcoin goes to a million dollars, or you buy a billion BulldogToken for a buck and hope that one dollar becomes worth $100k.
Under this system compliance would be much easier to ensure from the taxpayer perspective and to enforce from the IRD perspective. Yes there'd be fewer opportunities for the IRD to capture $ of random crypto-to-crypto transactions but it would be so much easier for people to calculate, declare and pay and far less complex if any auditing etc is required.
You don't understand that the aim of the game is to accumulate as much Bitcoin as possible and never sell it. It is the only absolutly scarce asset in the world and will always appreciate in price when compared to constantly and inevitably devalued government printed fiat currencies.
Spend is dollars, save in Bitcoin.
The early adopters were the only ones to make serious money. If you bailed out when it first hit $67K then you did really well. Problem is that as above figures, chances are you had bugger all invested in it anyway. Your average person makes far more money just buying a house.
The early adopters were the only ones to make serious money. If you bailed out when it first hit $67K then you did really well.
Probably more explosive gains have / can be made in altcoins. 100x gains in BTC from now will take some time. Those opportunities exist at times like this.
Anyway, even if one had bought at the previous peak in Nov 2021 and accumulated monthly, you would have returned 93% - far greater capital gains than NZ houses; holding NZD; or the majority of equities.
Only if they consider you a "trader" is my understanding. For crypto the IRD consider anyone to be a speculator and a trader. Talk about double standards. The intent is the same as crypto - to buy low and sell high. Don't tell me anyone is buying shares for the dividends these days. For me bitcoin is a long term investment for my retirement yet I will be taxed as soon as i sell vs. shares i may have held for the same length of time.
That's how I see it cromulent, if you buy shares, bitcoin or whatever whether they go up or down in value is irrelevant. When you sell then the profit or loss goes on your end of year books. Big deal what's the issue?
I guess many go to great lengths to avoid paying their fair share of tax, stuff them I say and good luck to IRD in tracking down any tax dodgers.
And just to add I am in favour of taxing capital gains on point of sale.
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