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New Zealand Allows for a Bitcoin Income, but makes it Taxable

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August 12, 2019 | 

586 Views | 

Darryn Pollock | 

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In a further step for the legitimacy of Bitcoin, New Zealand's tax authorities have ruled that income in cryptocurrencies is legal, they have also added guidelines as to how it should be taxed. This is not only a big step for crypto-users in New Zealand, it is an impressive move for clarity from regulators. 

Regulations continue to step up and try and keep pace with the advancing cryptocurrency sphere with one complaint often heard is that there is too much ambiguity. Taxation is one such area that leaves crypto-users stumped as in many nations there is no clear way to work out what is owned in tax from cryptocurrency.

Now, with New Zealand putting forward these regulations, as well as fully legalizing the chance to be paid in cryptocurrency, it has allowed for users to feel more secure in receiving Bitcoin for a salary, as well as opened the doors for the tax authorities to earn their part of this booming monetary system.

Be money-like

According to a tax information bulletin published earlier this month, the New Zealand Inland Revenue Department summarized the provisions of the public ruling, made under s 91D of the country's Tax Administration Act 1994.

This provision refers to cryptocurrency that is received as part of the employees’ regular salary and are fixed at a predetermined amount or rate. This is not intended to be fore payments that form part of an employee share scheme, as an example.

It also goes on to exclude self-employed persons, rather specifying those who earn full salary or wage. An important aspect of this provision is that there is no lock-up period, meaning that it does not allow for the volatile market to potentially add gains onto the value of the wage. 

“In the current environment where crypto-assets are not readily accepted as payment for goods and services, the Commissioner’s view is that crypto-assets that cannot be converted directly into fiat currency on an exchange are not sufficiently “money-like” to be considered salary or wages,” the guidelines read.

A need for better taxation

Taxation has been one of the areas in terms of cryptocurrency regulation that has needed the most work, it is an aspect that can not only increase the legitimization of the space in regards to governments and mainstream adoption, but it allows for the industry to find its space. 

If there is a sustainable taxation coming from cryptocurrency, it is much more likely it will receive government and regulatory support going forward. New Zealand has begun the ball rolling in regards to cryptocurrency that is received as a salary as it will now encounter a chance to receive tax from it. 

More so, the legislation it has put forward is purpose built for cryptocurrency, another pretty rare occurrence in this day and age, but something that is changing, and only for the betterment of the space. 

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