Everything you need to know about crypto tax in Australia

Cryptocurrency is already a well-established and popular form of currency. It's not uncommon to see news stories about bitcoin or other cryptocurrencies, but what many people don't realize is that cryptocurrency often comes with tax implications.

When it comes to cryptocurrency and tax in Australia, there are a few key things to remember. First of all, cryptocurrency is considered property for tax purposes. This means that any gains or losses made from trading or using cryptocurrency will be subject to capital gains tax (CGT). Secondly, you're required to declare your cryptocurrency transactions on your tax return. This includes buying, selling, exchanging, and spending cryptocurrencies.

For the Australian cryptocurrency users, we've put together a helpful guide to answer some of your tax-related questions:

With the Australian government implementing new laws surrounding cryptocurrency taxation, it can be difficult to know where you stand on this issue. This blog post will look at the basics of crypto tax in Australia and how it affects your finances going forward. 

What is cryptocurrency?

Cryptocurrencies such as Bitcoin and Ethereum aren't printed like dollars and cents. Rather they are virtual currencies that exist in an entirely digital environment. You can buy them online or at certain physical locations.

Cryptocurrency is considered property in Australia and the Australian Tax Office (ATO) treats them this way when it comes to tax. This means that if you purchase cryptocurrency, then you will be taxed on any resulting capital gains or losses. However, if you use or hold onto your cryptocurrency, then there are no taxes incurred at this point. 

In Australia, it's important to be aware of any new legislation surrounding cryptocurrency. More specifically, changes were made regarding the declaration of cryptocurrency on your tax return and a new capital gains tax (CGT) rule began back on the 1st of July 2017.

What is Capital Gains Tax, and how does it work?

Capital gains tax (CGT) is the charge that you pay on any profits made from selling assets or property. This can include things like shares, real estate, or even cryptocurrency. If you've purchased an asset for $10,000 and sell it later for $15,000, then you will have to pay capital gains tax on the $5,000 difference.

When it comes to cryptocurrency, the CGT rule has recently changed and you now need to declare any cryptocurrency that you purchase or sell as either a personal or business transaction.

Unless you're engaging in cryptocurrency as a business, then your transactions will likely fall under the personal category. In this case, you will be taxed at a flat rate of 15%. On the other hand, if you're engaging in cryptocurrency as a business, then you will have to declare these transactions using the same scale as any other business. To get the best returns from your crypto tax, contact Fullstack for a simple service you can complete online within minutes. 

How can I figure out my Capital Gains or Losses?

Calculating your capital gains or losses is an important step in understanding how much money you'll need to pay in tax. However, it's also difficult because you must accurately determine the original purchase price of the asset that you're trying to sell. This can be particularly complicated when dealing with cryptocurrency.

The ATO allows for a 'Fair Market Value' method. This essentially means that you can use the price of the cryptocurrency as it is quoted on an exchange at the time of selling. If you cannot obtain a quote or figure out your capital gains, then you may be able to work off the cost base and relevant expenses instead.

The amount you pay for a cryptocurrency (in $AUD) is known as your cost base. This includes any transaction costs incurred by your exchange.

When you cash out your money, the current market value of the coin (in $AUD) at this moment is your selling price.

Simply stated, capital gain or loss is determined as follows:

Sale Price – Cost Base = Capital Gain/Loss

If you hold the cryptocurrency for more than a year, you can get a 50% CGT discount if you're an individual or you operate under a trust. Super funds may benefit from a 33.3% reduction, while corporations aren't entitled to one in this instance.

In conclusion, it's important to keep track of any and all cryptocurrency transactions and to remember that in the eyes of the law and for the sake of taxes - they're considered Capital Gains.