Kiwi crypto-traders will come under increased scrutiny over tax obligations, the Inland Revenue Department (IRD) warned last week.
In a release, IRD spokesperson, Trevor Jeffries, said the tax department had the “tools and the analytics capabilities to identify and expose cryptoasset activities” – and it’s not afraid to use them.
“Data we have has helped us identify customers who are not paying their tax. That data is also now being used to identify customers with significant cryptoassets,” Jeffries said.
“Inland Revenue has identified 227,000 unique cryptoasset users in New Zealand undertaking around 7 million transactions with a value of $7.8 billion.”
While the bitcoin balloon has deflated in recent weeks, the favoured trading token has led crypto markets to new highs this year, potentially triggering tax bills for thousands of New Zealanders holding undeclared trading profits.
According to an IRD guide: “In most cases, the amounts you get from selling, trading or exchanging cryptoassets are taxable (this includes when you exchange one type of cryptoasset for another).”
However, investors exposed to crypto via the handful of locally domiciled funds such as Vault or the Kōura are taxed under the fair dividend rate regime.
The IRD notes that contrary to “popular thinking – people are not invisible on blockchain” amid more coordinated global cooperation between tax authorities and other regulators.
“We are applying those analytics capabilities and using data received from exchanges, both here and overseas. IR has signed up to the cryptoasset reporting framework,” Jeffries said in the release. “That means New Zealand works closely with other tax jurisdictions and will get more data on customers’ cryptoasset transactions outside New Zealand.”
Last year the International Organization of Securities Commissions (IOSCO) tabled a set of final recommendations to encourage globally consistent regulation of crypto markets.
At the time, IOSCO chair, Jean-Paul Servais, said in a statement: “Next, our attention turns to ensuring the adoption and implementation of the recommendations to support optimal consistency in the way crypto-asset markets and activities are regulated across IOSCO member jurisdictions.”
The IRD sent tax reminder letters to at-risk NZ crypto-traders last week.