​The Inland Revenue has published a Q&A on the income tax treatment of cryptocurrencies. You can find the document here.

Guidance on key points

The Inland Revenue's publication is helpful to clarify its view of some of the key issues relating to the income tax treatment of cryptocurrencies. These are the key points:


  • The Inland Revenue's view is that cryptocurrencies are a type of personal property, not actual currencies. To be a true currency the currency needs to be issued by a government.
  • Categorisation of cryptocurrencies as personal property determines the tax consequences of their disposal. Sale of an item of personal property can give rise to tax if it was acquired for the purposes of resale or as part of a business. Accordingly whether a disposal of a cryptocurrency will be taxable for an individual will depend on the circumstances in which it was acquired.
  • The Inland Revenue is of the view that Bitcoin and similar cryptocurrencies (not being true currencies) do not generally provide any benefit other than when they are sold or exchanged. The Inland Revenue notes that this "strongly suggests"  that cryptocurrencies are ordinarily acquired for the purpose of disposing of them – in which case any gain on disposal will be taxable (and losses should be deductible, with no ring-fencing applicable).
  • Disposal for this purpose will include exchanging the Bitcoin or other cryptocurrency for another cryptocurrency (or cashing it out into New Zealand dollars or another fiat currency), or using it to acquire goods or services.
  • Similarly, if your business accepts cryptocurrency as payment for goods or services, this is a taxable transaction (it is a barter transaction). You will need to convert the cryptocurrency amounts into New Zealand dollars and account for them as for any other payment for goods or services.


The Inland Revenue's Q&A does not refer to GST, but it is possible to apply the Inland Revenue's approach to income tax in the GST context. Specifically, if cryptocurrencies are to be treated as personal property assets (not true currencies) then it is logical that GST would need to be accounted for on transactions involving cryptocurrencies, for GST registered persons. Non-GST registered persons who are trading in cryptocurrencies would need to register for GST if they are making taxable supplies over the $60,000 annual threshold.


The Q&A focusses only on cryptocurrencies, and does not expressly discuss tokens. To the extent that tokens have overlapping features with cryptocurrencies, the reasoning in the Q&A should apply. For example, if you trade a token for a cryptocurrency or some other good or service, the arrangement will be seen as a barter transaction for income tax purposes and you would need to account for any gain made on the "sale" of the token.

Tokens are often described as having a "utility" feature – i.e. the holder of the token is often entitled to access some service provided by the platform which issued the token. Cryptocurrencies do not usually have such a feature.  However, again, the reasoning in the Inland Revenue's Q&A with regard to cryptocurrencies should be able to be applied. The token can be seen as a type of cryptocurrency, albeit that it might only be able to be used to acquire the services of the token issuer itself.

Issues of tokens on a TGE or "token generating event" raise particular issues. From an economic perspective a TGE is a means for an issuer to raise capital. If a sale of tokens by means of a TGE issuance is simply a sale of personal property assets, the receipt to the issuer of the proceeds of the issuance would be income, generating a potentially significant income tax liability (and possibly a GST liability, although many issuances are targeted to offshore investors, enabling GST zero-rating to apply). Questions as to the timing of recognition of that income can then arise. However, if the tokens are intended to be akin to some form of equity interest in the issuer, providing the holder with the right to receive profit distributions from the issuer but not otherwise having any utility feature, then the question arises as to whether the proceeds of the TGE can be treated the same way as the proceeds of an initial public offering (IPO) of shares – an event which does not give rise to a tax (or GST) liability for the issuer. This will often require an analysis of whether the token can be seen as a share in the company undertaking the issue or a unit in a unit trust.

Future guidance?

There is still room for additional guidance from the Inland Revenue on these issues. With respect to the issuance of cryptocurrencies (ICOs), which raise similar issues to TGEs, the Inland Revenue simply states that issuers should consider obtaining a binding ruling. In our experience, given the numbers involved and the uncertainties in the law in these areas, a ruling is indeed usually advisable, for ICOs and TGEs. The devil is in the detail and the Q&A (understandably at least at this point) does not go into that detail.

The Inland Revenue notes that it will supplement the Q&A from time to time. It is possible that some of the currently unanswered matters (such as the treatment of ICOs and TGEs) will be addressed in this way. Law reform, particularly around the GST treatment of cryptocurrencies (and perhaps tokens) is also a possibility. Australia, for example, has amended its GST legislation so as to exclude cryptocurrencies from the GST net. New Zealand may follow suit.

If you have any questions regarding any of the issues raised here or would like to discuss any aspect of the tax treatment of cryptocurrencies or tokens, please contact the authors or your usual Bell Gully adviser.

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