A question that we get asked often is…do I pay tax on cryptocurrency? If so, when?
If you acquire the cryptocurrency to make a private purchase and you don’t hold onto it, the crypto might qualify as a personal use asset. That said, in most cases, crypto is purchased as an investment, even if they do tap into them at times when needed.
Generally, a Capital Gains Tax (CGT) event occurs when disposing of cryptocurrency. This can include selling cryptocurrency for regular currency (e.g., $AUD), exchanging one cryptocurrency for another, gifting it, trading it, or using it to pay for goods or services.
Each cryptocurrency is a separate asset for CGT purposes. When you dispose of one cryptocurrency to acquire another, you are disposing of one CGT asset and acquiring another CGT asset. This triggers a taxing event.
Transferring cryptocurrency from one wallet to another is not a CGT disposal if you maintain ownership of it.
However, if you make a loss on cryptocurrency, you can generally only claim the loss as a deduction if you are in the business of trading.
𝗪𝗛𝗘𝗡 𝗬𝗢𝗨 𝗢𝗪𝗡 𝗖𝗥𝗬𝗣𝗧𝗢…𝗥𝗘𝗖𝗢𝗥𝗗 𝗞𝗘𝗘𝗣𝗜𝗡𝗚 𝗜𝗦 𝗘𝗫𝗧𝗥𝗘𝗠𝗘𝗟𝗬 𝗜𝗠𝗣𝗢𝗥𝗧𝗔𝗡𝗧!
We are talking receipts, details of the type of crypto, purchase price, date, and time of transactions in $AUD, records for any exchanges, digital wallet, and keys, and what has been paid in commissions or brokerage fees, and records of tax agent, accountant and legal costs.
𝗪𝗵𝗲𝗻 𝗶𝘁 𝗰𝗼𝗺𝗲𝘀 𝘁𝗼 𝗰𝗿𝘆𝗽𝘁𝗼, 𝗵𝗼𝗻𝗲𝘀𝘁𝘆 𝗶𝘀 𝘁𝗵𝗲 𝗯𝗲𝘀𝘁 𝗽𝗼𝗹𝗶𝗰𝘆!
The ATO regularly runs data matching projects and has carefully access the data from many crypto platforms. If the ATO 'finds' your crypto, you may expect delays with your return which may result in loss or diminished refund...or even a tax bill!
If you are uncertain how you may be affected - give us a call today to discuss, we work a lot with cryptocurrency within our client’s tax returns!