Cryptoassets are digital representations of value commonly known as cryptocurrency. These virtual assets function as a medium of exchange and operate independently of banks or other financial institutions. Bitcoin is a well-known example of a cryptoasset.
The growing popularity of cryptoassets means taxpayers may engage with them in various ways, including:
- Receiving cryptoassets as payment for goods and services.
- Using cryptoassets to pay for goods and services.
- Buying and selling cryptoassets (trading).
- Acquiring cryptoassets (e.g., through mining or a cryptocurrency exchange) and holding them as long-term investments.
For tax purposes in New Zealand, cryptoassets are treated as property. Inland Revenue has stated that most cryptocurrency-related transactions fall within the tax net. For instance, businesses accepting cryptoassets as payment for goods and services must pay tax on the New Zealand dollar equivalent of the cryptoassets. Similarly, those who mine cryptoassets are likely conducting a business rather than a hobby and will be taxed on their mining rewards.