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Decoding cryptocurrency taxation

Whether you’re currently investing in a cryptocurrency like bitcoin or considering buying a cryptocurrency, it’s vital to explore the tax implications. While these will vary according to your circumstances, and it’s important to seek professional advice, there are some basic things to understand.

Getting started with cryptocurrency taxation

No matter how you intend to use your cryptocurrency, you must keep accurate buying and selling records.

Your records must include:

  • Transaction date
  • The value of the cryptocurrency in Australian dollars
  • What the transaction was for and who the other party was, including their cryptocurrency address.

Tax responsibilities

In Australia, cryptocurrency transactions are subject to both income and capital gains taxes. While your digital wallet can contain different cryptocurrencies, each one is counted as a separate asset for Capital Gains Tax (CGT).

A Capital Gains Tax event occurs when you ‘dispose’ of your cryptocurrency. Disposal may mean that you:

  • Sell or gift cryptocurrency
  • Trade or exchange cryptocurrency
  • Convert cryptocurrency to fiat currency
  • Purchase goods or services with cryptocurrency

If you have transacted with a foreign cryptocurrency exchange, you may have tax responsibilities in another country.

Personal asset use

Personal use assets are not generally subject to tax on transactions. If kept or used to purchase personal items, your cryptocurrency use may be regarded as a personal asset. This means that capital gains/losses that arise may be disregarded. For example, buying cryptocurrency specifically to purchase an item that can be paid for using cryptocurrency could be considered personal asset use.

It’s important to know that this does not apply if you are buying cryptocurrency as an investment, as part of a profit-making scheme or as part of a business.

Keeping up to date with cryptocurrency taxation

Cryptocurrency is a rapidly evolving area. It’s essential to stay up to date and understand any developments in tax consequences. The ATO has a guide, including examples and links for additional information to help you.

If we can help you navigate this new investment option, please get in touch – we’d love to help.

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