Bruce Bernacchi: Dentons Kensington Swan tax expert on the IRD targeting crypto users who failed to declare it as taxable income

The IRD has confirmed it plans to target cryptocurrency users who haven't declared it as taxable income.

The department has identified 227,000 users in New Zealand who had made about 7 million transactions with a value of $7.8 billion in the last tax year.

Dentons Kensington Swan tax expert Bruce Bernacchi suspects there's tens of millions of dollars to potentially examine.

"We only have to look at how high some of the crypto asset prices have gone - you've got bitcoin currently trading at $58,000 (USD), four years ago it was $9,000. There's some people who are doing very well."

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Episode Transcript

Speaker 1 (00:00):
Inland Revenue has announced it's honing in on customers who
are dealing in crypto but not declaring the income on
the tax returns. Now, Inland Revenue reckons there maybe two
hundred and twenty seven thousand unique crypto asset users in
New Zealand and they are undertaking around seven million transactions
with the value of seven point eight billion dollars. Bruce
Binaki is a tax partner at Denton's Kensington Swan and

(00:21):
with us Hey Bruce at evening Hea, it's a lot
of money. Do you reckon that's on the money?

Speaker 2 (00:26):
Oh? Look, I do trust it. Id They've got access
to a lot of information these days, and certainly and
totally when you talk to people out there are no
plenty of people who are holding some crypto assets, so
not surprised at all.

Speaker 1 (00:38):
How much tax would they get? Do you think this
is the iid?

Speaker 2 (00:42):
Ah, Look, that is very hard to say, but I
think there's millions, possibly even tens of millions at stay here.
You only have to look at how high some of
the crypto asset prices have gone. You know, you've got
bitcoin currently trading at US fifty eight thousand dollars and
just four years ago it was nine thousand dollars, So
there is some people have been doing very well out
of all this crypto trading.

Speaker 1 (01:02):
Someone called Ben text me before says he's made thousands
of bucks off crypto. Didn't even realize he had to
pay tax?

Speaker 2 (01:08):
Is it?

Speaker 1 (01:08):
I mean, can you get away with pleading ignorance?

Speaker 2 (01:12):
You probably can't get away with it. No, but but
I have a lot of sympathy for that position. And
we famously don't have a capital gains tax in New Zealand,
and people probably think with crypto it's kind of like,
you know, you buy some shares and you sell them
a few years later and make a gain and don't
pay tax on it. The problem with crypto is, and
indeed with any asset, if you're a trader in the

(01:33):
asset or you buy it with an intention of resale,
any game you make, it's not a capital gain that's taxable.
And there's so much trading with crypto, and crypto is
not like like a share where you can earn a
dividend return off it. So iod's view is that any
gains on trading crypto is taxable.

Speaker 1 (01:49):
Do you believe them when they say that that I mean, well,
they say they know that there are two hundred and
twenty seven thousand possible people or unique crypto asset users.
Do you believe that they know who those people are?

Speaker 2 (02:02):
I do believe, and I do believe that they've got
some very good information they targeted because they have great
data mining tools these days, Heather, and they are the
most powerful organization pretty much in the country. They're information
gathering powers, you know, extend beyond those of the police,
and they can request information from banks, and they've entered

(02:26):
into international information exchange arrangements with other countries to get
information off crypto exchanges operating around the world. Now that
doesn't all can until twenty twenty six and twenty twenty seven,
but trust me, hither I've got information. Right.

Speaker 1 (02:42):
So, if you're one of the people who got a
letter from them late last year telling them that they're
a high risk customer and they need to sort it out,
you shouldn't take around.

Speaker 2 (02:50):
You should sort it out, absolutely, And they've sent out
another wave of letters just in the past week or so.
So if you're getting those letters, I'd be very concerned,
and I'd be getting some advice.

Speaker 1 (03:00):
Yeah, absolutely, Bruce, Hey, thank you very much, really really
fascinating stuff. That's Bruce Spinaki, tax partner at Denton's Kensington Swan.

Speaker 2 (03:06):
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