Crypto Holders Face Phantom Gains as NZ Tax Debt Looms

In New Zealand, where crypto assets have been taxable since 2026, taxpayers are facing a new challenge: managing tax debt that won't disappear even if their portfolio value does.

With Inland Revenue having identified around 355,000 crypto users responsible for roughly $36 billion in transactions, the department is actively identifying taxpayers and issuing assessments. Once an assessment is issued, the tax becomes payable, with a fixed sum in New Zealand dollars that won't shrink even if the market value of the assets falls.

The problem arises from the way income or loss is calculated on each disposal using its New Zealand dollar value at the time. This means that gains realized through token-to-token swaps can still be taxed even if the subsequent fall in value leaves no liquidity to meet the earlier bill, a phenomenon known as phantom gains.

Reconstruction of incomplete records, which are common in crypto transactions, is essential for taxpayers to substantiate their position and avoid inflated tax liabilities. However, this process can consume many hours of specialist time and may require blockchain tracing, exchange reports, and accountants rebuilding gains from incomplete data.