Crypto tax for individual investors: beware CGT on your digital assets
If you invest in cryptocurrency, you need to understand how crypto tax in Australia can affect you. The ATO generally treats cryptocurrency as a capital gains tax (CGT) asset, which means your crypto transactions can create tax consequences.
When does CGT apply to cryptocurrency?
Many investors only think about tax when they sell cryptocurrency and convert it back into Australian dollars. However, other crypto transactions can also trigger a CGT event.
For example, you may trigger a CGT event when you:
- sell cryptocurrency for cash
- exchange one cryptocurrency for another
- use cryptocurrency to purchase goods or services
- dispose of cryptocurrency in another way
Because CGT can apply to different types of crypto transactions, you should keep accurate records of every transaction. Record the transaction date, the value of the cryptocurrency and details of what you bought, sold or exchanged.
What happens if you make a crypto loss?
A profitable crypto transaction may result in a capital gain. However, cryptocurrency investments can also produce capital losses.
You generally can’t use a capital loss to reduce your salary or other ordinary income. Instead, you can generally use capital losses to reduce capital gains.
Keeping complete records of your losses is therefore just as important as recording your profitable transactions.
Can you claim the CGT discount on crypto?
If you hold a cryptocurrency asset for at least 12 months before disposing of it, you may qualify for the CGT discount. The discount can reduce the capital gain that you include in your taxable income.
Your individual circumstances will determine whether you can apply the discount, so make sure you review your eligibility before preparing your tax return.
The ATO receives information about crypto transactions
Don’t assume cryptocurrency transactions are invisible to the ATO. The ATO receives information about cryptocurrency transactions through its data-matching programs.
As data matching continues to make cryptocurrency activity more visible, accurately reporting your crypto transactions becomes increasingly important.
If you invest in cryptocurrency and aren’t sure how CGT applies to your transactions, talk to us. We can help you understand your crypto tax obligations, calculate your capital gains and losses, and make sure you report your transactions correctly.
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Important: Clients should not act solely on the basis of the material contained here. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas.
