Crypto-Asset Reporting Framework
- Business Studio
- 2 days ago
- 5 min read
Inland Revenue will begin to implement the Crypto-Asset Reporting Framework (CARF) from the 2026 financial year. This is a global initiative designed to improve transparency and ensure crypto income is being reported correctly. If you own, trade, or invest in crypto, it’s important to understand.
Understanding the Crypto-Asset Reporting Framework
The Crypto-Asset Reporting Framework is an international standard developed by the OECD. The purpose is to prevent the use of crypto assets avoiding tax and ensure tax authorities can see crypto transactions in the same way they see bank and investment income. It does this by forcing cryptocurrency exchanges and service providers to report the user transactions which is then shared will Inland Revenue.
How it works
Crypto service providers will
Collect your information
Legal names
Ird numbers
Account details
Track your transactions
Buying and selling crypto
Swaps between crypto assets
Transfers in and out
Report to Tax Authorities
The data that is collected will be provide to Inland Revenue
Inland Revenue are making these changes as historically crypto has been difficult to track, lightly regulated and underreported.
What to do if investing – Record Keeping is Essential
If you are trading regularly, its import to start record keeping, this includes holding copies of
Purchase prices
Sales prices
Dates of transactions
Any fees paid
It’s important to keep records to be able to defend your position if Inland Revenue were to ever challenge you. IR have the right the charge penalties if accurate records are not kept or if you have failed your due diligence obligation.
Interested in CryptoAsset Investment – But need a translation of the terminology?
From the start, the cryptoasset sector has attracted people fascinated by the emerging technology and others keen to explore its possibility to create wealth. The sector has seen mercurial change and is still developing. Regulatory bodies such as Inland Revenue are refining their approaches to it.
The landscape and terminology are still changing. But generally, tax consequences involving cryptoassets arise when they are:
bought and sold (trading)
acquired and held on to as an investment
received as payment for goods and services
used to pay for goods and services.
Common terms
Cryptoassets are units of value that are transferred, stored, or traded electronically and secured cryptographically. They can also be called:
cryptocurrencies
cryptographic assets
digital financial assets
digital tokens
virtual currencies
There is a wide range of crypto-assets, including:
payment tokens: a means of payment or exchange, for example Bitcoin and Litecoin. They are also called exchange tokens, intrinsic tokens or simply cryptocurrencies.
security tokens: represent existing property or financial assets, and so mirror securities like shares or debt. They grant the holder an ownership right in an asset (e.g. shares, bonds, commodities, real estate, personal property etc) and they may also be called asset tokens.
utility tokens: these are more like traditional payment vouchers. They can be used to gain direct access to specified goods or services by granting the holder the right to obtain a product or service.
So what is Blockchain?
Whatever you call cryptoassets, whatever you use them for, you need some way of keeping tracking of them. This is where blockchain comes in.
A blockchain stores information electronically in digital format as a database. It can be used to maintain a secure, decentralised record of transactions. It guarantees the recorded data’s fidelity and security and generates trust without the need for a trusted third party. It’s a ledger technology.
There is new and emerging language for cryptocurrency activities and transactions, such as:
Airdrop: when a cryptoasset is distributed for free to participants, commonly to help a cryptoasset gain attention.
Hard fork: when a change in the protocol of a blockchain network results in a new cryptoasset diverging from the existing one.
Mining crypto-assets
is a process that creates new blocks and achieves consensus on the blocks to add to the blockchain. Miners can receive cryptoasset rewards in return for verifying additions to the blockchain. Different consensus models are possible, for example:
proof of work, using computer resources to validate transactions and maintain the blockchain transaction ledger. A proof of work miner may choose to mine cryptoassets alone, or as part of a mining pool, where miners combine their processing power to earn rewards, splitting the rewards proportionate to their individual contributions.
proof of stake, requiring an investment in the cryptoasset itself. Users are generally required to lock a certain number of cryptoassets into the network as their stake. A pseudo-random election process selects a user to be the validator of the next block. Some people choose to take part in proof of stake mining through a third-party staking-as-a-service provider or a staking pool rather than staking on their own.
Non-fungible Tokens “NFT’s”
Non-fungible tokens (NFTs) are like cryptoassets (but aren’t cryptoassets as they are not interchangable).
NFT’s are digital assets that represent real world objects.
What is the Tax Position on Crypto-assets?
Cryptoassets
Are a form of property for tax purposes. Ultimately the income tax treatment will depend on the characteristics and use of the cryptoasset.
The buying and selling of cryptoassets is not subject to GST. But do have GST implications when they are traded as payment for normal business activities.
In most cases, when you sell, trade or exchanging cryptoassets the gain is taxable (this includes when you exchange one type of cryptoasset for another).
You may have to pay tax because you’re:
acquiring cryptoassets for the purpose of disposal (for example to sell or exchange)
trading in cryptoassets
using cryptoassets for a profit-making scheme.
For tax reporting purposes the cryptoasset transactions will need to be converted into NZD at the time of the purchase and disposal.
If you are paying employees in cryptoassets the usual PAYE and FBT rules continue to apply.
Non-fungible Tokens “NFT’s”
NFTs are classified as a service for GST. Selling NFTs is subject to GST so you need to register for GST if you sell more than $60,000 worth of NFTs in a 12-month period. If the NFTs are sold to people outside of New Zealand the sales are zero-rated for GST purposes.
Whether income tax will be payable depends on the purpose the NFT was acquired.
Generally you will be liable for income tax on the sale if:
your business creates NFT’s
you buy and sell NFTs to make a profit
you acquired NFT’s for the purpose of disposal.
This means any profit made from royalties and selling NFT’s is taxable income.
How we can help
As accountants, we can help you stay ahead of the change in a number of ways including:
Review your crypto activity and tax position
Ensure your income is correctly reported
Support you in carrying out your due diligence requirements
Giving you confidence that your income and information received by Inland Revenue is taxed correctly
Disclaimer: The information provided in this article is general in nature and does not constitute personalised tax advice. You should consult with Business Studio before making decisions based on this content
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