Crypto Debit & Credit Cards: Practical Tool or Tax Trap?
As cryptocurrency becomes more integrated into everyday life, crypto-linked debit and credit cards are gaining traction globally. These cards allow users to spend their digital assets as easily as they would fiat money. Behind this convenience lies a layer of tax complexity that users that are NZ tax residents need to be aware of.
How the IRD Views Crypto Spending
The Inland Revenue Department (IRD) treats cryptocurrency as property, not legal tender. This classification is crucial because it means that every time you spend crypto – even via a card – you’re disposing of a property asset. Under section CB 4 of the Income Tax Act, this can trigger taxable events.
Topping Up vs Spending
Topping up your card with crypto doesn’t usually count as a disposal – at that stage, you’re still in control of the asset. The taxable event occurs when you make a purchase, because that’s when ownership is transferred and value is realised. The gain being the market value of the crypto at the time of transaction less its original cost. Consequently, good record keeping becomes imperative
What Gives Rise to a Disposal?
Spending your crypto is just one of several actions that may count as a disposal for tax purposes. Others include:
Each of these can result in a taxable gain or loss.
BOTTOM LINE – CAUTION IS THE KEY
As the regulatory landscape evolves, the treatment of crypto could change – potentially recognising it more like currency. But for now, using crypto payment cards brings a level of administration and tax burden that may outweigh the convenience. In order, to keep things simple, we recommend that more conventional methods of payments be used.
Welcome to Louise
We welcome on board a new Office Administrator Louise Dromgool who has taken over from Janine. Whilst Louise has a wealth of experience in public practice, she is still finding her feet in her new role and we kindly ask that you please keep this in mind when speaking to her.
Disclaimer
All information in this newsletter is, to the best of the author’s knowledge, true and accurate. No liability is assumed by the author or the publisher for any losses suffered by any person relying directly or indirectly upon this newsletter. You are advised to consult a senior representative of the firm before acting upon this information.
August 2025
