Everything you need to know about Crytpo Assets

You’ve seen and heard the hype around crypto assets, and you’ve decided that now is the time to invest. But how does it actually work and how does trading with crypto assets impact on your tax? Crypto assets are essentially digital currency that allows you to pay and receive “payment” for goods and services.. Think of them as ‘tokens’ that can be traded for other goods and services.

However, even though crypto assets have no physical form like traditional money, they still have an impact on your taxation and business. Because of this, it’s important that you keep an accurate record of your crypto asset transactions. This includes:

  • The type of crypto asset
  • Date of transaction
  • Type of transaction (example, received or disposed of)
  • Number of units
  • Value of the transaction in New Zealand dollars
  • Total units of each crypto asset held in the beginning and end of year (this makes your end of year financials much easier)
  • Exchange records and transaction statements
  • Wallet addresses (these act as your ‘email addresses’ for your crypto asset)

You’ll need to keep a record of these for at least 7 years, even if you no longer have any crypto currency. It’s also important that you regularly download your crypto asset exchanges as they may expire from records before it’s time for you to do your tax returns.

If you are GST registered you must account for GST on receipt and payment of goods and services in crypto currency. However, the purchase of crypto assets itself is not subject to GST.

Transacting with crypto assets is a taxable activity and can raise large tax bills. IRD does not accept crypto assets as a form of payment, after all it is not a legal tender. One option is to convert a percentage of crypto income into cash at the time of receipt. This will reduce the risk of NZD values being lower than when crypto income was received (your crypto assets may not be worth the same when it comes time to pay tax). A balanced approach is recommended.

Here at Futureproof Concepts, we’ve decided to invest in QOIN ourselves so that we have firsthand experience in what other businesses are working with. We are also accepting QOIN as a payment option going forward (T’s & C’s apply). So, if you have any questions regarding crypto assets and the impact on your tax, please let us know.

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