How does the New Zealand calculation work?
Taxoshi cryptocurrency tax reports are based on a FIFO (First in First Out) calculation method where the profit and loss is calculated in the requested reporting currency at the time the trade occurred.
Taxoshi’s algorithm will attempt to match sales to purchases across multiple tax years if the data is available. If any trades can not be reconciled from the uploaded data, the manual reconciliation values are used as the first available inputs for the FIFO calculation.
It’s important you start by generating reports for your earliest tax year first and work your way forwards so any unsold purchases can be used as the first inputs for the subsequent year’s FIFO calculation.
The taxable value of mined cryptocurrencies is first calculated at the time they were mined and in the requested report currency. Each mining transaction is then added to the pool of available inputs for the FIFO calculation with the secondary profit or loss then being the difference in value between when they were mined and subsequently sold.
The exchange rates used in the algorithm are taken from the CoinGecko API which is considered by the New Zealand Inland Revenue Department to be a reliable data source. All historical prices are based on a daily ‘average’ calculated from the daily ‘open’, ‘close’, ‘high’ and ‘low’ data points.
Other Resources
IRD Guidance
The Inland Revenue has released more information on their position on cryptocurrency and tax
Employee Schemes
Inland Revenue is extending its guidance on cryptocurrencies to cover their use in employee share schemes
Industry Opinion
Scott Mason from Findex unpacks the Inland Revenue guidance on cryptocurrency taxation