New Zealanders navigating tax and investment rules are increasingly raising questions about cryptocurrency losses, KiwiSaver withdrawals, and PIE tax settings. In RNZ’s personal finance coverage, RNZ journalist Susan Edmunds addresses common queries with input from tax specialists and government agencies.
Claiming Crypto Losses Against Income
As digital assets become more mainstream, Inland Revenue has stepped up enforcement around crypto income. Profits from trading are generally taxable, but losses can also be claimed—provided certain conditions are met.
If you’ve made a loss on cryptocurrency, you can offset that against your taxable income. However, if you are not regularly filing tax returns and are instead automatically assessed, you’ll need to request and complete a return to include the loss.
According to Deloitte crypto specialist Ian Fay, losses must be reported in the tax year in which they are realised. For example, a loss from selling crypto below its purchase price during the year ending 31 March 2026 must be included in the 2026 income tax return.
There are also rules governing how to calculate the cost of crypto sold. These typically follow either a “first in, first out” method or a “weighted average cost” approach.
It’s important to note that unrealised losses—where the asset has dropped in value but hasn’t been sold—cannot be claimed. When completing a tax return, crypto gains or losses that don’t fall under business or self-employment income should be entered under “other income”.
To claim a loss, taxpayers must demonstrate that any corresponding gain would have been taxable.
KiwiSaver Hardship Withdrawals and Benefits
Questions around KiwiSaver hardship withdrawals often relate to how they interact with government support.
People aged 65 and over are not included in hardship withdrawal data, as they can access their KiwiSaver funds freely. For others, available data does not distinguish between those in employment and those receiving benefits.
The Ministry of Social Development (MSD) advises that a one-off hardship withdrawal is generally not treated as income and does not affect benefit payments. However, regular withdrawals over time may be assessed differently and could influence eligibility.
Withdrawn funds may also count toward asset thresholds, particularly for support such as the accommodation supplement. Individuals in this situation are encouraged to check directly with MSD.
For tax purposes, KiwiSaver withdrawals are not considered taxable income.
Why PIE Tax Uses Past Income
Portfolio Investment Entities (PIEs), including most KiwiSaver funds, are taxed using a Prescribed Investor Rate (PIR). This rate is based on a person’s income over the previous two tax years, rather than the current year.
Deloitte tax expert Robyn Walker explains this approach is largely about practicality. Using current-year income would create uncertainty, as investors may not yet have finalised their earnings or filed returns.
Instead, basing PIR on prior years provides a stable and predictable rate for fund managers to apply. It also helps avoid under- or over-taxation issues seen in other systems, such as Working for Families.
For example, someone investing at the start of a new tax year may not yet know their most recent income but will have confirmed figures from earlier years to determine the correct PIR.
This system can also benefit investors with fluctuating incomes, as it allows some flexibility if earnings vary from year to year. For retirees relying mainly on NZ Superannuation, PIR is unlikely to change significantly.
Investment providers are required to prompt investors to regularly confirm their PIR to ensure it remains accurate.
A Practical Approach to Complex Rules
From crypto trading to retirement savings, New Zealand’s tax and welfare systems aim to balance fairness with administrative simplicity. While the rules can be technical, understanding when and how income or losses are recognised is key to staying compliant and making informed financial decisions.
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