Investing in cryptocurrency can be rewarding, but it comes with unique tax implications. In Australia, the Australian Taxation Office (ATO) applies existing tax legislation to cryptocurrency transactions, which can result in specific tax liabilities.
Capital Gains Tax (CGT) refers to the taxation of profits made from the disposal of certain assets and rights (“CGT assets”). Although commonly referred to as a separate tax, CGT is part of income tax, with net capital gains included in your assessable income.
Net Capital Gain Formula:
Net Capital Gain = Capital Gains – Capital Losses
The ATO classifies crypto assets as CGT assets. For example, bitcoin has been subject to CGT rules since 2014.
Capital Gain Formula:
Capital Gain = Capital Proceeds – Cost Base
Capital Loss Formula:
Capital Loss = Reduced Cost Base – Capital Proceeds
Unused capital losses can be carried forward to offset future capital gains.
Any crypto activity must be declared in your income tax return. The ATO requires accurate record-keeping and reporting of all transactions.
Manually calculating crypto taxes can be challenging. CryptoTax Calculator offers tools to streamline this process:
To comply with the ATO’s requirements, maintain records of:
Document when you bought and sold crypto assets.
Track the original purchase price and the amount received upon sale.
Record the value of crypto in AUD at the time of each transaction.
Keep detailed information about the wallets and exchanges used for transactions.
Tokens received via airdrops are taxed as ordinary income at their market value when received.
Rewards earned through staking are treated as ordinary income.
Newly received tokens from a chain split have a cost base of $0 and are not immediately taxable.
Crypto payments for wages are treated as income or fringe benefits.
Crypto used for personal purchases may qualify as a personal use asset if acquired for less than $10,000. Long-term holdings are generally not considered personal use.
Crypto lending might trigger CGT, and interest earned is taxed as income.
Transfers between personal wallets are not taxable events but require proper record-keeping.
Selling crypto for fiat currency is a taxable CGT event.
Exchanging one cryptocurrency for another triggers CGT.
Capital losses may be claimed with sufficient documentation.
Non-fungible tokens (NFTs) are treated as CGT assets. Gains from sales are taxable.
Stablecoins are also subject to CGT when disposed of or exchanged.
Activities like yield farming, liquidity pooling, and borrowing in DeFi are subject to income tax or CGT depending on the transaction type.
Cryptocurrency tax can be complex. Use tools like CryptoTax Calculator to simplify the process or consult a professional for tailored advice.