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A guide to cryptocurrency and tax in Australia
Given its esoteric reputation, you might assume that cryptocurrency is not a relevant taxable asset in Australia. Think again. The Australian Taxation Office (ATO) has your crypto earnings in its crosshairs.
In early 2022, the ATO announced four key focus areas for tax season. These were record-keeping; work-related expenses; rental property income and deductions; and capital gains from crypto assets, property, and shares.
If you’ve bought, sold and/or earned interest on cryptocurrency, including non-fungible tokens (NFTs) during the financial year 2021/22 (1 July - 30 June), you’ll need to declare your gains and losses on your tax return.
“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns. You can’t offset your crypto losses against your salary and wages,” ATO Assistant Commissioner Tim Loh said.
“Through our data collection processes, we know that many Aussies are buying, selling or exchanging digital coins and assets so it’s important people understand what this means for their tax obligations.”
Is cryptocurrency legal in Australia?
Absolutely. It’s lawful to buy, sell and hold cryptocurrency in Australia. Coins are treated as taxable assets. Cryptocurrency exchanges (digital marketplaces where crypto is traded) must register as financial service providers with the Australian Transaction Reports and Analysis Centre (AUSTRAC).
What does the ATO know about my crypto holdings?
When you sign up to an Australian crypto exchange or utilise a digital wallet, it’s likely that Know Your Customer (KYC) information is reported to the relevant tax authorities.
The ATO has access to crypto transaction data and information, provided by domestic and international exchanges, dating back as far as 2014 and is always expanding its sources and tracking capabilities.
The type of information they collect can include your name, date of birth, address, Australian Business Number (ABN), transaction and account details, linked bank accounts and digital wallets, types of cryptocurrencies traded, amounts, fiat conversions and more.
This means that even if your crypto trades are recorded on foreign exchanges, you must declare them as part of your Australian tax return. Otherwise, you may face serious penalties for tax evasion.
How are crypto transactions recorded?
Cryptocurrency trades are logged on the blockchain. A blockchain is a digital ledger that stores information related to crypto. Blockchains are designed to be decentralised, perpetual registers that exist on peer-to-peer networks.
There are companies that can provide you with crypto tax reports when you connect the exchanges and wallets you use. You can pass this on to your accountant or, if you’re doing your own taxes, enter the figures from the report into your ATO submission.
How is crypto taxed in Australia?
Despite its name, the ATO considers cryptocurrency to be a property (asset) and not a currency.
If you’ve transacted with crypto in any way - bought, sold, gifted, traded, exchanged for altcoins or converted to fiat currency - you must declare all transactions and any capital gains or losses as part of your income tax return.
Generally, a capital gain or capital loss is the difference between what an asset cost you and what you received when you disposed of it. Be aware that the cost price must include any transaction fees charged.
If you hold a cryptocurrency asset for more than 12 months you’ll be eligible to receive a 50 per cent discount on the Capital Gains Tax (CGT). Crypto traders who hold assets for less than one year will be charged the full amount.
For example:
You purchase Bitcoin for $2,000, hold it for 14 months, sell at $6,500 and make a capital gain of $4,500. In this instance you’ll only have to pay CGT on 50% of your gains, which will be $2,250.
It’s in your interest to claim any losses sustained on your crypto investments. When you have both capital gains and losses in the same financial year, they’re calculated to establish your net capital gain or loss for that year. If you incur a net capital loss, this can be carried forward to a future capital gains year and used to offset those gains.
There are certain circumstances where you may claim crypto as a personal use asset and could be exempt from paying CGT, such as coins acquired for less than $10,000 and used to buy items within a short period of time.
For example:
A concert promoter offers attendees entrance tickets for purchase using cryptocurrency. You buy $150 worth of eligible cryptocurrency and on the same day use these assets to pay for an event ticket and merchandise.
How much you owe in income tax will depend on your total income throughout the year, including your taxable cryptocurrency assets. The following table outlines the ATO’s income tax rates for the 2022/23 financial year:
| Income | Tax Rate |
| $0 - $18,200 | 0% |
| $18,201 - $45,000 | Nil + 19c of each $1 over $18,200 |
| $45,001 - $120,000 | $5,092 + 32.5c of each $1 over $45,000 |
| $120,001 - $180,000 | $29,467 + 37c of each $1 over $120,000 |
| $180,000+ | $51,667 + 45c of each $1 over $180,000 |
The above rates do not include the Medicare levy of 2%.
Determining the exact amount of tax you’ll pay or receive on your crypto gains and losses will depend on your personal tax circumstances. Consulting a tax accountant or financial expert may help you figure out how much tax you’ll be charged or how much money you’ll get back.
What crypto records should I keep?
The ATO advises that you keep records of each of your crypto assets and every transaction including:
- Receipts when you buy, transfer or dispose of crypto assets
- A record of the date of each transaction
- A record of what the transaction is for and who the other party is (their crypto asset address)
- Crypto exchange records
- A record of the value of the crypto asset in Australian dollars at the time of each transaction
- Records of agent, accountant and legal costs
- Digital wallet records and keys
- A record of software costs that relate to managing your tax affairs
It’s also advisable to set recurring reminders to export your transaction history at least every three months, and before closing any accounts with an exchange or wallet provider.
The ATO also suggests using a reputable Australian crypto tax calculator - there are free and low-cost services available to sync your exchange and wallet accounts - and to contact the crypto exchange's customer service if you need to recreate lost records.
You should keep records for five years from the later date of when you obtain the records, when transactions or acts are complete or the year that the CGT event happens.
Can I calculate my crypto taxes on my own?
If you’ve done your research and are confident that you’ve explored all avenues available for discounts, deductions and declarations then, of course, you can complete your tax return unassisted.
It may be beneficial to consult a tax accountant to ensure you’re maximising your returns and legally fulfilling your tax obligations. There may be minor details you miss or confusing questions, depending on your circumstances.
Please note – every investment is a risk. Past performance is not a reliable indicator of future performance. Before investing in cryptocurrencies, equities, or any other assets, consider seeking financial advice to determine the best options for your financial situation and goals.
Disclaimer
This article is over two years old, last updated on October 7, 2022. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent cryptocurrency articles.
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