Confused about crypto tax in Australia? This guide has you covered. Whether you want to know how crypto is taxed, understand the basics of Capital Gains Tax (CGT), or discover what the Australian Taxation Office (ATO) knows about your crypto, you’ll find all the answers you need right here.
Crypto Tax in Australia
In recent years, the ATO has issued a series of increasingly detailed guidelines on crypto taxation. We’ve set out a snapshot of the ATO guidance over time so you can see how the ATO’s reporting requirements have evolved:
- Initially, in 2014, the ATO’s guidance clarified that using cryptocurrency to purchase goods and services could trigger CGT on any resulting gains or losses.
- By 2017, the ATO expanded its guidance to emphasise the need for record-keeping for all crypto transactions, including details such as transaction dates, values in AUD, and types of transactions.
- Most recently, in 2023, the ATO’s guidance was further expanded to address the complexities of decentralised finance (DeFi) transactions, as well as staking, wrapping, liquidity pools, interest, lending, and borrowing.
How is crypto taxed in Australia?
The ATO treats cryptocurrencies as CGT assets, similar to stocks and property. However, the exact tax treatment of your crypto depends on the nature of your transactions. Generally, there are two primary ways that your crypto transactions could be taxed: under Capital Gains Tax rules or the broader Income Tax rules. Capital Gains Tax applies to the sale or exchange of crypto assets, while Income Tax is relevant for earnings related to staking rewards and DeFi yields. If you are carrying on a business of trading cryptocurrencies, the gains or losses are brought to account under the broader Income Tax rules, not the Capital Gains Tax rules.
Ultimately, your tax liability is determined by the nature of the crypto asset, the types of activities you undertake, the context of those activities, and whether they are part of a business operation. If you get stuck, make sure you reach out to a tax professional who specialises in cryptocurrencies for help.
What is capital gains tax?
Capital Gains Tax (CGT) applies to the profits you make when you dispose of a CGT asset. A capital gain (or loss) arises only when a ‘CGT event’ occurs. Such events include selling, swapping, or gifting crypto, as well as depositing it into a smart contract. The most common CGT events involving crypto are:
- Selling crypto for AUD or another fiat currency.
- Swapping one crypto asset for another, including stablecoins and NFTs.
- Using crypto to purchase goods or services, or spending it through crypto cards.
- Gifting crypto to another individual.
Generally, your capital gains are calculated by reducing the sale price (‘capital proceeds’) of a CGT asset by its original purchase price (‘cost base’).
Capital Gain = Capital Proceeds – Cost Base
For instance, if you buy shares for $10,000 and later sell them for $15,000, your capital gain is $5,000 ($15,000 – $10,000). Additionally, if you hold your crypto for at least one year before disposing of it, you may qualify for a 50% discount on any capital gain arising from that crypto transaction, significantly reducing your tax liability.
Does the ATO know about my crypto?
The ATO monitors cryptocurrency activities, and if you have an account with an Australian cryptocurrency service provider (DSP), it’s possible that the ATO already has access to your data. The ATO unveiled a significant initiative to gather personal and transaction details from 1.2 million Australian crypto investors through exchanges, with the goal of ensuring tax compliance. The data collected may include:
– Names and dates of birth
– Addresses and email addresses
– Wallet addresses and linked bank accounts
This initiative builds on and extends prior agreements between crypto exchanges and the ATO. Since 2020, the ATO has sent numerous communications to crypto investors, underscoring their tax obligations and emphasising the need for precise reporting of taxable crypto transactions.
Tax tips for crypto investors for this tax season
Tip 1: Start early so you aren’t in a rush prior to the deadline as it can take some time to reconcile transactions depending on the platform you use. You also want to be able to play around with the different inventory methods that are available to see which one allows you to minimise your tax burden.
Tip 2: Use reputable crypto tax software to regularly sync and document all of your transactions throughout the year allows you to stay on top of your tax situation throughout the year and helps you make strategic decisions when trading so that you can minimise your tax bill for next year.
Tip 3: If you have a complex case, working with a crypto native tax professional.
Navigating crypto taxes in Australia can be a daunting task. CTC simplifies the complicated process of declaring your crypto asset activities with tax regulators. As one of the most integrated crypto tax software products on the market, Crypto Tax Calculator is designed to handle even the most complex on-chain transactions, ensuring you stay compliant with ATO regulations while minimising your tax bill.
Now you’ve learnt some of the basics about crypto tax and how the ATO treats crypto, you can start investing.
FAQs
Do I pay tax on crypto in Australia?
In Australia, individuals are generally required to pay tax on cryptocurrency transactions. The ATO views cryptocurrency as an asset for CGT purposes, which means that any capital gain or loss from the disposal of cryptocurrency will need to be included in your annual tax return.
How do I declare crypto to ATO?
To declare cryptocurrency to the ATO, you should maintain detailed records of all your transactions, including the date, the value in Australian dollars at the time of the transaction, what the transaction was for, and who the other party was (even if it’s just their wallet address). You’ll need to report any capital gains or losses as part of your annual income tax return. It’s important to keep records for five years after you make the transaction.
How do I figure out my crypto taxes?
Use software that can generate detailed reports, making it easier for you to file your tax returns accurately. Crypto Tax Calculator simplifies the process of tracking and reporting your cryptocurrency transactions. It can handle the complexity of crypto-to-crypto trades, airdrops, staking rewards, and mining income, ensuring that you comply with ATO regulations. If you need more help, talk to a tax professional.
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eToro does not provide tax, investment, or financial advice. The information provided by eToro is general in nature and does not take into account your individual circumstances. You should not rely on this information as tax advice. We strongly recommend that you seek independent advice from a qualified tax professional to understand your specific obligations and circumstances.