Understanding Tax on Bitcoin and Cryptoassets in New Zealand: Holder vs Trader
We’ve been asked this question many times, and recently one of our viewers reached out and said: “Please explain the tax on cryptoassets, especially Bitcoin, and how taxation works — particularly, how does IRD determine whether you are a long-term holder or a trader, and how tax will apply to that?”
So let’s dig into this and break it down. I’ll also share how my own view applies here.
Now, as I’ve already mentioned, IRD has some guidelines — you can find them at ird.govt.nz/cryptoassets. According to those, cryptoassets are treated as a form of property for tax purposes.
What do they mean by "form of property"? Basically, they’re saying cryptoassets are not currency and not a financial arrangement. So specifically, IRD has stated that cryptoassets are not considered financial arrangements under the tax rules. That’s important.
They also clarify that if you’re trading cryptoassets, they may be treated as trading stock — and in that case, you're considered a trader, which means you need to value them at cost at the end of the tax year.
Furthermore, IRD confirms that cryptoassets are not subject to GST. So when you’re buying or selling crypto outside of the GST net, there’s no requirement to register for GST — which is important for many people who are confused about whether they need to account for GST on crypto trades.
Now, let’s look at how IRD defines cryptoassets. According to them, cryptoassets are “cryptographically secured digital representations of value that can be transferred, stored, or traded electronically.” So essentially, cryptoassets use distributed ledger technology, or blockchain.
The term cryptoasset is used broadly — and includes:
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Cryptocurrencies
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Cryptographic financial assets
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Digital tokens
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Virtual currencies
Please note, there is no standard legal terminology for crypto, and cryptoassets are not specifically legislated for in the Income Tax Act 2007. However, IRD has noted on their website that you can seek guidance by contacting:
So what’s the issue?
From my perspective, there isn’t a clear-cut direction from IRD. On one hand, they say that in most cases, income from selling, trading, or exchanging cryptoassets is taxable. Even if you’re simply swapping one type of crypto for another, it can trigger a taxable event.
On the other hand, they refer to the “purpose of acquisition”, your pattern of activity, and whether the use of crypto falls within a profit-making scheme — which means the responsibility falls on the taxpayer to self-assess and justify their position.
IRD applies five key tests to help distinguish between a Holder and a trader. Let’s go through them:
1. Purpose of Acquisition
What was your intention when acquiring the cryptoasset? Was it to sell it for a gain?
Now, this is highly subjective. Think about it: most people acquire crypto to make money. Why else would you invest in a digital asset that has no underlying value? When you buy shares in a company, there’s an underlying asset — maybe plant and machinery, land and buildings, goodwill, or at least the potential for dividends.
With crypto, there's usually no return on investment unless you sell at a higher price. So, proving that your main intention was not to make money is going to be very difficult for the average taxpayer.
From my point of view, there should be clearer guidelines from IRD. But perhaps they’ve left it vague intentionally — because when people start claiming tax losses, they want to limit exposure. So, in a way, IRD has left this subject intentionally open-ended for us to interpret and apply.
2. Pattern of Activity
How often are you transacting? Are you doing this regularly, or is it just a one-off? A regular and systematic pattern could indicate trading.
3. Knowledge and Experience
Do you have expertise or experience in crypto, finance, or similar industries? The more experienced you are, the more likely IRD will view your activity as trading.
4. Timeframe Between Purchase and Sale
If you buy and sell within a short period, this may indicate trading. Long-term holding suggests investment — but again, it’s not black and white.
5. Use of Cryptoassets
Are you using crypto in a profit-making scheme, or for personal reasons? This distinction can affect your tax treatment.
And here's a critical point: the onus of proof lies on the taxpayer. IRD can simply say: “We believe this is taxable.” Then you must prove otherwise. That’s why record-keeping is absolutely essential.
If you're a crypto user — regardless of whether you're a Holder or trader — make sure you keep complete and detailed records, including:
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Date of each transaction
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Type and quantity of the asset
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NZD value at the time
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What was the nature of the transaction (buy/sell/swap/use)
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Fees incurred
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Wallet addresses and transaction IDs
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Platform or exchange used
These records will help support your tax position and prove whether you should be taxed or not.
Final Thoughts
Understanding how IRD treats crypto is crucial — and unfortunately, much of it is left to self-assessment and individual judgement. Whether you're holding long-term or actively trading, the tax implications can be significant.
If you’re unsure how to classify yourself or want help preparing the right records, we recommend booking a consultation with a tax specialist.