Cryptocurrency has emerged as a digital asset class gaining widespread attention. As an Australian cryptocurrency investor, it is essential to comprehend its nature and the corresponding tax obligations that come with it.
Taxation of Cryptocurrency in Australia: The Australian Taxation Office (ATO) treats cryptocurrencies as assets rather than currency for tax purposes. This means that when you acquire or dispose of cryptocurrency, it is subject to capital gains tax (CGT) rules. Here are some key points to consider while accounting for cryptocurrencies in your tax return:
- Cryptocurrency as an Investment: If you hold cryptocurrency as an investment, any capital gain or loss made upon disposal will be subject to CGT. CGT is calculated by subtracting the cost base of the cryptocurrency from the proceeds received upon its disposal. The resulting capital gain is included in your assessable income for the tax year.
- Personal Use Asset Exemption: The ATO provides an exemption from CGT if the cryptocurrency is used for personal use, and the cost of the asset is AUD 10,000 or less. However, if the cost exceeds AUD 10,000, CGT will apply to the entire disposal.
- Cryptocurrency Trading as a Business: If you actively trade cryptocurrencies as a business, profits generated will be treated as assessable income. You can deduct any expenses incurred in running your cryptocurrency trading business, such as transaction fees or software costs. Keep accurate records of all transactions and expenses to support your claims.
- Record Keeping: To accurately report your cryptocurrency transactions, it is crucial to maintain detailed records. Keep track of dates of acquisition and disposal, the value of cryptocurrency in Australian dollars at the time of each transaction, and any associated expenses. These records will be necessary for calculating CGT or determining assessable income.
Cryptocurrency has gained significant popularity, prompting governments worldwide to develop regulations regarding its taxation. In Australia, cryptocurrencies are treated as assets subject to CGT rules. Whether you hold cryptocurrency as an investment or engage in trading as a business, it is essential to understand your tax obligations and keep accurate records.
The Australian Taxation office has implemented a data matching program since 2019 focusing on Cryptocurrency transactions. The data is collected from designated service providers and is used to identify buyers and seller and to quantify the related transactions. The ATO will then compare these transactions with its own records to identify individuals who are failing to meet their reporting and payment obligations.
As per the ATO guidelines, most activities involving Crypto assets amount to a transaction, which gives rise to a CGT event. If there is a CGT event, you may make either a capital gain or loss on the disposal of the asset.
A transaction involving a disposal takes place when you do any of the following:
- Sell a crypto asset
- Gift a crypto asset
- Trade, exchange or swap a crypto asset for another crypto asset
- Convert a crypto asset to Australian or foreign currency
- Buy goods or services with a crypto asset
The ATO has provided a summary to help.
The complexities surrounding accounting for Crypto transactions can be made easier using Cryptocurrency platform programs. Roberts + Morrow have subscriptions to such programs and the use has dramatically reduced the processing time, which also results in cost savings to clients.
Please contact Roberts + Morrow on 6774 8400 or enquiries@rm.net.au to discuss these options.
