The past year has been an exciting time in cryptocurrency and blockchain, with a large flurry of activity peaking in May 2021.
We have seen the rise and ongoing growth of many decentralised finance projects, non-fungible tokens (NFTs), decentralised autonomous organisations (DOAs), improvements to both proof of stake (POS) and scaling issues needed to carry this technology out to the masses.
As a result of the ongoing advancements in this space New Zealand MPs are looking to hold an inquiry to determine what risks and opportunities are involved and possible implications on the financial & tax systems. You can read more form the RNZ article here.
Inland Revenue has released guidance on the tax treatment of crypto assets, a very brief summary being:
- Exchanging one crypto for another crypto (or NZD) is treated as a taxable event e.g. you buy one crypto asset for $1000 and dispose of it for $1500, you would pay tax on the $500 gain. Similarly if the price went down you would be able to claim a loss at the time of disposal.
- Receiving interest or rewards by staking, mining, providing liquidity to a ‘pool’ or other means is treated as income (convert this to NZD at the time received).
- Your ‘purpose’ when buying a particular crypto asset is also a strong factor in determining a taxable position on the sale of these assets.
Anyone who has bought or sold cryptocurrency understands that tracing these transactions can be a nightmare at the best of times. In some cases, interest and rewards are paid out daily which means converting the price to NZD for every payment.
This is an increasingly popular topic in business discourse in 2021, so make sure you’re connected to all things Sidekick! You’ll find most of our content either in the Sidekick Business Lounge, our Facebook page, or right here in the Newsletter. Ben Bailey (our Crypto enthusiast) and Ric Thorpe are always around to chat further about this topic, so feel free to get in touch!