Some taxpayers have 2018 terminal tax payments due on 7 April 2019. This is the final tax payment due for the year ending 31 March 2018. We have also previously signaled 2019 provisional tax payments (due 7 May 2019) which are dependent on 2019 profits.
The article below outlines frequently asked cryptocurrency tax questions regarding these upcoming tax payments for both 2018 terminal tax and 2019 provisional tax.
We have also previously published "What is terminal tax?" and "What is provisional tax?" These may be helpful as initial reading without reference to cryptocurrency fluctuations.
If you have any questions, or would like to chat please contact Tim Doyle today for a no obligation phone call or meeting on 07 823 4980 or email Tim now.
My 2018 tax is due on 7th April 2019, can I pay it off over time? Do IRD interest or IRD penalties apply?
Yes, you can pay it off over time but IRD will charge use of money interest at approx. 8.22% pa. Provided that you have a payment arrangement negotiated with IRD prior to the due date there will be no late payment penalties.
You could use Tax Management NZ (TMNZ) which would result in paying a lower interest rate (~5.22% pa) but there are some additional administration costs in setting this up. We recommend the TMNZ option if the tax amount is more than $10 - $15k
We normally charge a small fee for putting in place a payment arrangement with IRD as it can be time consuming (~ $250 - $350 + GST). Alternatively, you can call IRD yourself and negotiate a payment arrangement.
If you would like us to negotiate and request the payment arrangement on your behalf, please let us know how much you are proposing to pay per month for how long?
How do I pay the tax to IRD?
We send tax payment reminder notices to all our clients in early March. This includes payment details, amounts and how to make these payments.
All five major banks in NZ have a pay tax option set-up through internet banking. Login to your internet banking, click on pay tax, select tax type: Income Tax, Period ending: 31 March 2018, and use your IRD number as the reference.
Based on the current cryptocurrency market, my holdings at 31 March 2019 will likely be lower than 1 April 2018. If this is the case, do I still need to pay 2019 provisional tax? What happens if I have already paid any 2019 provisional tax?
If your holdings are less at 31 March 2019 than 31 March 2018, it is highly likely you will not have any 2019 provisional to pay. You will still receive a notice from IRD saying you have the provisional tax to pay (as it is a standard assessment based off the 2018 tax return), however provided your holdings are less it is likely you will not need to pay this.
2019 provisional tax that has already been paid will be refunded back to you if you do not have a 2019 tax obligation. IRD will normally hold any provisional tax until your 2019 tax return is filed and assessed.
If my holdings at 31 March 2019 are less than 31 March 2018, will I get a tax refund?
This depends. To get a tax refund you must have paid tax in the first place. This can include tax deducted from your PAYE salary (that your employer does automatically).
For most employees, to get a tax refund you need to have made a realised loss or be in the business of trading. I will provide further information about this prior to March 2019.
If you have not paid any tax, or have no other income, you will have a loss to carry forward and offset any future income you earn.
What happens in the 2020 tax year if I decide not to trade? (I hold the same tokens/coins for the full year; resulting in the same quantity of tokens/coins at the end of the year as there was at the start).
The taxable event for cryptocurrency is when a coin is disposed. As you will not dispose any coins, there would be no taxable events to account for. This includes both any taxable profits and tax-deductible losses.
We are Chartered Accountants who prepare financial statements and income tax returns that involve cryptocurrency. We also provide personalised tax advice to your individual circumstances.
Contact Tim Doyle on 07 823 4980 or email Tim to arrange a no obligation call or meeting to discuss any crypto tax or accounting questions. Our office is in Cambridge, NZ, but distance is no problem. We have many international and national clients.
This is only our interpretation and has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.