8 Sep 2020

IRD issues new guidance on cryptoassets

2:00 pm on 8 September 2020

New guidelines on how cryptoassets are taxed falls short of addressing the more complex issues in the sector, according to a legal expert.

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Bitcoin. Photo: 123rf.com

Cryptoassets, whether they be in the form of currencies or digital assets, have no special tax rules covering them and are currently treated as a form of property for tax purposes.

Inland Revenue's new guidance is aimed at improving how ordinary tax rules apply to cryptoassets, so people can understand their tax obligations.

"This updated guidance allows people to work out what tax they need to pay when they sell, trade, swap, lend or mine cryptoasset transactions. They can find out what records to keep and work out what they need to put in their tax return," IRD spokesperson Tony Morris said.

The new guidance gives specific information on how people work out what there cryptoasset income and expenses are, how to calculate the New Zealand dollar value of their assets and information on the records that need to be kept.

A special counsel at the law firm Bell Gully, Campbell Pentney, said the new guidelines were a step in the right direction but more work was needed.

"It doesn't deal with some of the more pressing questions, for example, in block chains you have what are called forks, a fork is when a chain splits in two and then you have two different coins and then the question is if you sell both are you taxed in the same way for both of those coins?

"So that's not there yet and there's probably other questions that need to be answered."

Pentney said one of the problems was that IRD struggled to keep up with the pace at which new crypto technology evolved.

He said that cryptocurrency needed its own specific tax rules to make it easier to comply with.

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