The ATO considers crypto investments as an asset for tax purposes. Transactions involving crypto may be subject to Capital Gains Tax (CGT). If you dispose of any crypto, you may be required to pay CGT on any capital gain. The ATO also requires you to keep accurate records of acquiring the crypto and any other associated costs.
The ATO uses a combination of data matching, risk profiling, compliance activities, voluntary disclosure and education to track and identify businesses and individuals that are not reporting their crypto transactions.
HOW IS CRYPTO TAXED?
When Crypto is Taxable
The most common use of crypto is as an investment, in which case the crypto asset is a capital gains tax (CGT) asset.
If you acquire a crypto asset as an investment, transactions such as disposal or exchange or swap are a CGT event and you may make a:
- capital gain
- capital loss, which can reduce capital gains you make.
You can't deduct a net capital loss from your other income. You may be able to reduce capital gains using the CGT discount if you hold your crypto asset for at least 12 months.
In general, a CGT event happens when you dispose of a CGT asset. For the purposes of crypto assets, that may be when you:
- sell a crypto asset
- gift a crypto asset
- trade, exchange or swap one crypto asset for another
- convert a crypto asset to Australian or foreign currency
- buy goods or services with a crypto asset.
- transfer between crypto wallets
Before you calculate CGT on your crypto assets, you will need to:
- check you have records for your crypto assets and crypto transactions
- convert the value of the crypto assets into Australian dollars.
You need to keep details for each crypto asset as they are separate CGT assets.
When Crypto is Non-Taxable
A crypto asset is a personal use asset if you keep or use it mainly for personal use. The most common situation of personal use of crypto assets is to buy items for personal use or consumption.
The relevant time for determining if a crypto asset is a personal use asset is when you dispose of it:
- A crypto asset you acquire and use in a short period of time to buy items for personal use or consumption is more likely to be a personal use asset.
- A crypto asset you acquire and hold for some time before you use it, or only use a small proportion of it, to buy items for personal use or consumption is less likely to be a personal use asset.
A capital gain on the disposal of a crypto asset is disregarded if both:
- it is a personal use asset
- you acquire it for less than $10,000.
A capital gain on a personal use asset is not disregarded if it cost you more than $10,000 to acquire the asset.
You can find out more about tax and crypto directly from this link at the ATO website.