Cryptocurrency transactions attract both Capital Gains Taxes and Income Taxes in Australia.
Cryptocurrency transactions attract both Capital Gains Taxes and Income Taxes in Australia. The Australian Tax Office (ATO) has set out clear guidelines on how crypto buying, selling and mining is taxed. Here we break down everything you need to know about crypto taxes and how you can avoid notices, audits and penalties later on. We'll also explain how to calculate your crypto taxes, the forms you need, and tips on how to reduce your Australian tax bill.
This guide is regularly updated
Before we start - crypto tax rules are in constant flux. At GBS we keep a very close eye on the ATO's crypto policies and regularly update this guide to keep you informed and tax-compliant.
Update 30 June 2021: Watch our Aussie Crypto Tax Guide 2021 on Youtube.
Update 28 May 2021: The ATO issued a statement addressing crypto investors & traders.
Update 13 May 2021: Updated for 2021.
Update 22 June 2020: ATO warns 350,000 investors & traders to disclose or face penalties.
First Published 24 July 2019: Welcome to your Australian cryptocurrency tax guide!
Yes, Cryptocurrency is taxed in Australia.
In Australia, cryptocurrency is viewed as an asset and attracts Capital Gains Tax and Income Tax. With the ATO announcing that it's specifically targeting cryptocurrency traders, it’s essential that you understand the tax consequences of your crypto trading. If you’ve bought or sold cryptocurrency in the last financial year, you will need to declare your crypto totals on your income tax return.
Will the ATO know about your crypto?
Yes. If you have an account with an Australian cryptocurrency designated service provider (DSPs), then it's likely that the ATO already has your data.
The ATO has a data-sharing program with all Australian exchanges.
The ATO knows has crypto transaction data from as far back as 2014.
The ATO has the Know your customer (KYC) information you provided when signing up for any Australian exchange or wallet.
In 2020, 350,000 Australian crypto investors were treated to a letter from the ATO warns that crypto was indeed taxable and that failure to declare could result in penalties for tax evasion. In this instance, recipients were given 28 days to disclose their crypto trades. See it here.
28 May 2021 - The ATO issued a reminder to Australian crypto users to report all gains on their tax returns. Approximately 100,000 taxpayers will receive a warning letter outlining their obligations and asking them to review their previously lodged returns. A further 300,000 people are expected to be prompted as they lodge their 2021 tax returns.
To determine tax liability, the ATO is collecting data from crypto exchanges and comparing it to amounts entered on previous tax returns.
Failure to declare crypto gains can attract a penalty of 75% of the outstanding tax liability, plus the tax itself and interest on the shortfall. Read the full press release here.
How Australia taxes Cryptocurrency
The Australian government does not see Bitcoin and other cryptocurrencies as money nor foreign currency. Instead, the ATO classes crypto as property, and as an asset for Capital Gains Tax (CGT) purposes. Crypto can also be viewed and taxed as Income Tax. How you're taxed depends on your 'intentions' and setup.
Investor or trader?
The ATO views participants in the crypto market as either a trader or an investor for tax purposes.
Investor: An investor is just that - an individual investing in a future return. An investor buys and sells crypto as personal investment 'stock' with the goal of gradually building wealth over an extended period of time. The strategy is to buy-and-hold and profit is made from long-term capital gains typically. Most Australian crypto users fall into this category and transactions will be subject to Capital Gains Tax. In some cases, Income Tax may also apply.
Trader: A trader is active in crypto as a means to generate an income and is operating from a business setup. If you're running a crypto trading, forging or mining business, regularly buying and selling for short term gains, or running a crypto exchange, the ATO would tax you as a trader. Profit is taxed as ordinary income.
Not sure which one you are? The lines can get a little fuzzy. Read here for more advice from the ATO.
Capital Gains Tax
A capital gains tax (CGT) event occurs when you dispose of your cryptocurrency. Dispose means to sell, gift, trade, exchange, covert or use crypto.
Most crypto trades carried out by individuals in Australia will attract a CGT. You'll pay 50% less tax on crypto gains made after 1 year of purchase. As an investor, you'll pay capital gains tax when you:
Exchange crypto for fiat
Exchange crypto for crypto
Buy goods and services (if not seen as a personal use asset)
Gift & donating crypto
Receive crypto as a gift
Trade stablecoins
Margin trading, ICOs / IEOs, Forks / Chain Splits for investment purposes
Mining & forging Crypto as a hobby
Capital Gains Tax Rate
If you’re trading crypto as an individual (investor), the percentage you’ll pay on Capital Gains Tax is the same as your income tax rate for the year. Your income tax rate depends on your total income during the tax year.
How to work out your Capital Gains Tax
The ATO provides the following guidance on how to calculate and report your crypto capital gains.
The first step is to determine your cost base. This is the purchase price of your crypto plus the costs related to acquiring or disposing of it. Now you can work out your Capital Gain, or Loss.
crypto cost price + fees = cost base
Now let's define what a capital gain is. Simply put, a capital gain is the profit or loss you make from trading or selling crypto:
Capital gain = selling price - buying price - fees
Capital Gains tax is paid on the profit from a trade.
Gains: If you make a capital gain when you dispose of cryptocurrency, you’ll need to pay tax on some or all of that gain. ex. if you paid $1000 for 1 BTC and sold the Bitcoin later on for $2000, then you will pay a CGT on the $1000 profit.
Or, if you bought 1 BTC for 1000 AUD and also paid a fee of $10, then your cost basis is $1010. If you later sell the Bitcoin for $1500 then you will realise a capital gain of $1500 - $1000 - $10 = $490. You will have to pay a CGT on that $490.
CGT Discount: If you hold your cryptocurrency for more than a year before selling or trading it, you may be entitled to a 50% CGT discount. And even if the market value of your cryptocurrency changes, you won't make a capital gain or loss until you actually dispose of your holdings.
Losses: If the proceeds from the disposal of the cryptocurrency are less than what you paid to acquire it initially, you will experience a capital loss. If you make a loss on the trade then you can deduct it from other profits or even carry over the loss to future years. Losses can offset gains made on cryptocurrency investments, share investments and even property investments.You can't deduct a net capital loss from your other income.
Income Tax
There are many cases where crypto gains are seen as income and thus attract income tax, especially if the ATO views you as a trader, versus an investor. For example:
Getting paid in crypto as an individual
Accepting crypto for payment of goods and services as a business
Airdrops (participant and involuntary) as an individual & business
Forging as a business
Signup & referral bonuses as an individual & business
Interest from lending, staking, DeFi and master nodes as an individual & business
Margin trading, ICOs / IEOs, Forks / Chain Splits for investment purposes as a business
Crypto Mining & Forging as a business
Tax Free
The following crypto activities are tax-free in Australia:
Buying Crypto
Holding Crypto
Token & Coin Swaps
Transferring Crypto Between Own Wallets
Buying Goods and Services (Under A$10,000, if it's a personal use asset.)
Donating Crypto to registered charities
How to report your crypto tax activity?
The ATO wants to know about your crypto activity in terms of income and capital gains. You'll need to declare both in your annual tax return, in the same way you need to report your regular income, gains and losses.
Tax deadline
The Australian tax year runs from July 1 - June 30 the following year. If you are lodging your own tax return for July 1, 2020 – June 30, 2021, it needs to be filed by October 31, 2021.
Lodging through an accountant? You have until March 31 2022 to file.
Still have some questions about lodging your tax return? Talk to GBS Accountants. Our experienced tax consultants will be able to help.
Happy tax claiming!
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