Introduction to Cryptocurrency Tax in Australia
Australian Taxation Office aka ATO has certain guidelines about cryptocurrency taxation on their website and is available to the public. They have explained various scenarios around trading, investing in cryptocurrencies by taking the popular cryptocurrency Bitcoin as an example.
Bitcoin is neither considered money nor Australian currency or any other foreign currency. It’s considered as an asset and is subject to capital gains tax (CGT). Not just Bitcoin, all other cryptocurrencies like Bitcoin are considered the same for tax filing.
A CGT is applicable when you sell your cryptocurrency. However, all your holdings must be mentioned in tax filing to avoid any issues.
You pay tax only when you sell and not just buy and hold.
Few types of transactions for CGT calculation are as follows
- Sell your cryptocurrency to fiat Australian dollars,
- Trade to buy another cryptocurrency
- Buy goods or services using cryptocurrency
Exceptions for Crypto Tax in Australia:
- Few capital gains or losses that came from the disposal of cryptocurrency which is a personal use asset can be disregarded.
- If cryptocurrency sell is a part of your business, then the profits can be considered as an ordinary income.
What’s is a personal use asset?
Cryptocurrency is not a personal use asset if it is acquired, kept or used:
- as an investment
- in a profit-making scheme
- in the course of carrying on a business
Example of a personal use asset:
If a furniture shop is offering 20% discount when paid in cryptocurrency, Dave pays $500 to acquire necessary amount of Bitcoin and pays for his dining table on the same day. Given the circumstances where Dave bought and used Bitcoin, it is considered as a personal use asset and do not attract any taxes.
While trading cryptocurrencies, it is common to get involved in analysis, news and memes — but it’s important to keep a record of all trades you do and their buy and sell amount and costs. Few things to be recorded are
- Timestamp of the transactions
- Value of cryptocurrency in Australian dollars while at the time of transaction
- Reason for the transaction and who’s the other party involved (could be just their address)
Don’t worry, There are tools like BearTax which can connect with all your exchanges and consolidate your trades with their timestamp and price at that timestamp. If you have few deposits done by your friends or paid for goods and services you’ve offered — they can be reviewed and provided with proper sources to calculate cost basis (price in AUD at that time of transaction)
BearTax actually cuts down your effort as an individual or a chartered accountant by a ton of hours. You could do all the consolidation, review and calculation in minutes.
If you are a chartered accountant looking for help. Reach out to us at firstname.lastname@example.org
If you receive Bitcoin for goods or services you offer or provide as part of your business, you need to include the value of the Bitcoin in Australian dollars as part of your ordinary income. This is the same process as receiving any other non-cash consideration under a barter transaction.
One way to calculate the value of Bitcoin accepted in Australian dollars is to use tools like BearTax and provide the timestamp according to the date received and it will calculate automatically using price at that timestamp.
Crypto to Crypto Transactions
One of the biggest questions in taxation space while trading cryptocurrency is whether buying one cryptocurrency with another one is considered taxable or not.
Answer: IT IS TAXABLE
Australian Taxation Office (ATO) has specifically mentioned that while exchanging one cryptocurrency to another one, it means that you are selling the first cryptocurrency and buying a second one.
Those were the guidelines mentioned on ATO’s treatment of taxes on trading cryptocurrencies.
Summary about cryptocurrency tax in Australia
- Crypto is considered as an asset and subject to CGT.
- When used as a personal asset, it can be disregarded.
- When accepted as a part of business — it’s a normal income.
- Crypto to crypto exchange means selling one crypto and buying another one and is taxable.
At every step, it’s clear that you need to
- Fetch all your transactions from various exchanges, hardware wallets, software wallets, cryptocurrency payment gateways and merchant tools whichever is applicable to investors and consolidate them together.
- Find the price in Australian dollars at every timestamp needed.
- Match the buys and sells in a FIFO fashion.
- Calculate gains and losses for each trade or income record.
- File your taxes online or complete the paper tax return and supplement(section 18 is for capital gains where you would incorporate your cryptocurrency capital gains).
At BearTax, we help with the daunting and time-consuming steps from 1-4 and provides you with the information needed in the CGT section for filing taxes. Visit us at https://bear.taxand if you have any questions, please contact us using the chat box at the bottom of the page.