What happens if I don’t declare my cryptocurrency transactions on my tax return?You may be liable for penalties or even worse, tax evasion. The Australian Taxation Office (ATO) has collected data on transactions dating back as far as 2014 and has access to a data-sharing program with all Australian exchanges. As well as knowing your customer (KYC) information you provided when signing up for any Australian exchange or wallet.
Do you have to pay tax on crypto?While many people are unaware of the tax implications, the short answer is “yes,” and you do pay tax on cryptocurrencies. Whether buying locally within Australia or abroad you will need to pay tax, these amounts will vary depending on your intention and individual situations. Although you are not taxed on the purchase of cryptocurrency in Australia, If you purchase crypto using a fiat currency (Australian dollars, British pounds, US dollars, etc..) you will be liable for tax on the disposal of your cryptocurrency. Cryptocurrency is also GST-free.
Does the Australian Taxation Office monitor cryptocurrency transactions in Australia?The Australian Taxation Office (ATO) monitors all transactions and applies different tax rules for traders and investors. The ATO utilises a data-sharing program that monitors all Australian exchanges, so the ATO knows when you buy, sell, or earn interest on cryptocurrency in a financial year. It is therefore important to keep accurate records of your crypto purchases so that you can work out the cost basis of your transaction when selling your cryptocurrency.
How much tax do you pay on cryptocurrency?How much tax you pay on crypto depends on whether you are categorised as a crypto investor or trader. Investors are most commonly subject to Capital Gains Tax (CGT), while traders are typically carrying on a business or profit-making activity that derives Ordinary Income. This is also largely dependent on the structure you have used to invest in cryptocurrency. Contact us to find out more about how we can assist you.
What is the difference between a crypto trader and an investor?These two categories are important when determining your cryptocurrency tax in Australia:
- Crypto Trader is an individual that buys and sells cryptocurrency for the sole purpose of generating an income, this would mean that you are regularly buying and selling for short-term gains, using trading as a form of business.
- Crypto Investor is an individual that buys and sells cryptocurrency with the main objective to build wealth. These are long-term investments for future returns.
Is there a threshold for crypto tax?The percentage of Capital Gains Tax you’ll pay is the same as your personal income tax rate. You are only liable for income tax when you reach $18,200 in total income per year.
Is crypto tax deductible?It depends on your gains or losses, cryptocurrency losses could result in a deduction on future tax submissions.
Do I need to file crypto taxes if I made a loss?Yes, you would need to include this in your tax submission and if you have a net capital loss, you can use it to reduce a capital gain you make in a later year.
Are there any tax exemptions on crypto?Yes, you can get an exempion from capital gains tax if you hold cryptocurrency as a personal use asset. Where cryptocuecifically-bitcoin/?page=2#personaluserrency is acquired and used within a short period of time, to acquire items for personal use or consumption, the cryptocurrency is more likely to be a personal use asset. Cryptocurrency is not a personal use asset if it is kept or used mainly:
- as an investment
- in a profit-making scheme, or
- in the course of carrying on a business.
How is crypto taxed in Australia?Depending on which of the above categories that you fall into, would influence how you would be taxed. Both traders and investors are liable for income and capital gains tax (CGT) on earnings above $18,201, while Investors can enjoy a 50% (CGT) discount on crypto gains that they have held for more than a year before disposing of. Income and capital gains tax are applicable on any cryptocurrencies disposed of; this includes trading, gifting, selling, purchasing things, converting, and/or exchanging for other forms of cryptocurrencies. It is also crucial to note that based on how the crypto was acquired, would determine if income tax would be applicable. Capital gains made from the sale of cryptocurrency attract a 100% Capital Gains Tax in the first year, and 50% in succeeding years. Our team at creditte follow the changing Australian crypto tax laws closely, so you can always trust us for sound advice.
Why do you have to pay taxes on cryptocurrency in Australia?The Australian Government does not deem Cryptocurrency as local or foreign currency but rather as an asset that carries income tax and capital gains tax (CGT). The Australian Taxation Office (ATO) would apply tax if you receive an income from trading in cryptocurrency in Australia, if you purchased your cryptocurrency abroad then you would be liable for tax in the country of purchase.
Do I have to report crypto on my taxes, if I haven’t sold it?No, cryptocurrency is only taxed on disposal. You would only report your crypto transactions once you have disposed of them.
What is considered cryptocurrency disposal?Any exchange of cryptocurrency in Australia, whether it be for cash, goods, or other cryptocurrencies is generally deemed a disposal, these disposals are liable for capital gains tax and need to be listed on your tax return as a gain or a loss.
How do I calculate my capital gains tax on cryptocurrency in Australia?To accurately calculate your capital gain or loss you would need to determine the value of your cryptocurrency purchases and sales in Australian dollars: A capital gain or loss is the difference between the following:
- Cost base is the cost incurred in obtaining ownership of the cryptocurrency. This includes the purchase price, certain other costs associated with acquiring the ownership (e.g.: brokerage fees, accountant, or legal costs), holding and disposing of the cryptocurrency.
- Capital proceeds are what you have received or the market value of what you receive when you dispose of your cryptocurrency.
Am I taxed on staking or Airdrops?Any income earned from Staking or Airdrops will not constitute a Capital Gains event. Instead, the ATO considers additional tokens received from these processes to be income. They are taxed according to your income bracket.
Are there any tools to help me calculate my cryptocurrency tax?When it comes to tax season, crypto can be a real headache, especially if you’ve traded different assets, across different platforms and wallets throughout the year, without keeping clear records. Through our partnership with Crypto Tax Calculator, we’re able to accurately calculate any tax that may (or may not) be due without you having to dig through all your trades.
Do I need to include cryptocurrency in my taxes?Yes, when filing your taxes with the ATO you would need data from all your exchanges. To avoid problems with the ATO it’s important that you have clear structures in place to track movements, returns, losses and manage your tax obligations. The team at creditte are crypto tax specialists and can help minimise your tax while giving you the structures to maximise your wealth. Contact us to book a free consultation.
What records should I keep when trading or investing in cryptocurrency in Australia?As a minimum you would need to keep the following records concerning your cryptocurrency transactions:
- the date of the transactions
- the value of the cryptocurrency in Australian dollars at the time of the transaction
- what the transaction was for and who the other party was (even if it’s just their cryptocurrency address)
- receipts of purchase or transfer of cryptocurrency
- exchange records
- records of agent, accountant, and legal costs
- digital wallet records and keys
- software costs related to managing your tax affairs
Which countries are crypto tax-free or carry a lower tax?The below countries may not necessarily be 100% tax-free, but you will pay less crypto tax:
- El Salvador