IRD have made an overhaul to their cryptocurrency guidance. Their updated information can be found here.
In summary, there are no significant changes or updates to the taxation of cryptocurrency, however the guidelines do provide some (but limited) clarity about staking tokens – purchased with an intention to earn an income stream. We have reviewed this position in a separate article published here.
Summary of Cryptocurrency Tax
If you are a client, or follow our articles, the IRD update will provide limited new information. It does confirm several positions we have previously published.
- Cryptocurrency is considered property for tax purposes. The tax treatment depends on the characteristics and use of the cryptocurrency, not what they are called.
- Our cryptocurrency tax summary outlines that if you acquired cryptocurrency for the intention of disposal, the profits are taxable, and that each trade is a taxable event.
- The updated IRD guidelines provide examples about the tax differences between trading and holding cryptocurrency. We have previously published the tax implications (and differences between) trading and holding activities here which includes examples about trading stock, calculation methods and business expenses.
- The IRD update provides information about cryptocurrency record keeping, which is in line with our earlier guidance.
- IRD confirms a tax deduction for the original acquisition price of stolen cryptocurrency can be claimed in the year it was stolen (provided it was purchased with the intention to dispose).
- Your purpose (intention), your actions (what you actually do) and the duration of time, that you do what you say you will do, is fundamental when determining the taxable treatment. We have outlined further information about this here.
Contact Tim Doyle for a no obligation call or meeting to discuss any cryptocurrency tax or accounting questions. Our office is in Cambridge, Waikato, or we can arrange a video conference call.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.