'You're not invisible': IRD warns crypto investors in tax crackdown

Inland Revenue is warning hundreds of thousands of Kiwi crypto investors to properly declare their earnings now – or risk an "expensive surprise down the line".

The agency said it had identified 355,000 unique crypto-asset users, who had collectively undertaken around 57 million transactions with a total value of $36 billion.

Tax authorities warn that profits from selling, swapping or exchanging crypto-assets must be correctly declared as income in New Zealand.

A first batch of letters has been sent to people who would normally have their tax assessed automatically – but Inland Revenue knew to have traded on one or more crypto-asset exchanges, a spokesperson said.

"Despite popular thinking, people are not invisible on blockchain. We have the tools and the analytics capabilities to identify and expose crypto-asset activities," the spokesperson said.

"Inland Revenue will be matching the information to tax returns and following up on any discrepancies."

People were warned to "get tax compliant now, so they don’t end up with an expensive surprise down the line".

Those receiving the letters were urged to review their tax position and, where needed, file an individual income tax return, known as an IR3, to correct any errors.

Under New Zealand tax law, crypto-assets were deemed a form of property.

Any profit made from selling, trading or exchanging was considered income, added to a person's other annual earnings, and taxed within their regular income tax bracket.

Inland Revenue said investors making money from crypto-assets should be thinking about their tax obligations and "the risks of not declaring all related taxable activities".

The agency also noted New Zealand was implementing the Crypto-Asset Reporting Framework, in which tax authorities internationally would exchange more data.

Through the framework and annual exchanges with other tax authorities, local tax authorities would be informed about transactions and transfers of crypto-assets taking place overseas by New Zealand tax residents.

A spokesperson for Inland Revenue said the initiatives brought "much-needed visibility to the crypto world", shifting it from what had been "a vague grey area to international transparency with much tighter enforcement".

The agency added that anyone uncertain about their obligations could seek advice from an independent tax adviser.