Are you investing or considering buying cryptocurrency, like bitcoin? It’s important to explore the tax implications.
Crypto transactions are on the ATO radar, and Tax and GST rules apply the same to crypto as to other forms of payment, just like bartering.
Agilis CA can help with getting your crypto transaction records together for your Tax Return.
Have you dived into the world of cryptocurrency exchanges?
Cryptocurrency is used to describe encrypted virtual currencies which exist as digital tokens. This digital currency operates outside of government via decentralised ledgers or digital wallets but can be exchanged for online goods and services.
The ATO treats cryptocurrency as a form of barter exchange. There is no problem with exchanging goods and services so long as the transactions are recorded and valued correctly.
Getting Started – Crypto Transaction Records
No matter how you intend to use your cryptocurrency, you must keep accurate records of your buying and selling.
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
In Australia, cryptocurrency transactions are subject to both income and capital gains taxes. While your digital wallet can contain different types of 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. Your cryptocurrency use may be regarded as a personal asset if it is kept or used to purchase personal items. 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.
Cryptocurrency and the ATO
The ATO has taken a lenient approach to pursue taxation of crypto assets. However, now that cryptocurrency is attracting more mainstream investors and there is a lot more data available, the ATO checks the taxation obligations of individuals and businesses with crypto assets.
There are different rules for using cryptocurrency in business and for personal expenses or investment. Business transactions use the trading stock rules, while private exchanges involve capital gains tax rules.
Let Agilis CA Help Keep You Up To Date
Cryptocurrency is a rapidly evolving area. It’s important 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.
Agilis CA can explain the ATO’s rules and regulations for your investments, and provide guidance for your situation.
Contact Agilis CA to check that all your crypto transactions are recorded correctly for your Tax Return. Don’t get caught out by the ATO spotlight on cryptocurrency.
This blog was originally published by BOMA, but has had edits made by Agilis CA for the benefit of our readers.