How Does Crypto Tax Work in Australia?

[Updated August 21, 2024]

Taking care of your yearly taxes can be challenging. Keeping up with any changes and following up on lost bits of information whilst lodging your taxes promptly requires a good deal of patience and persistence.

To make sure you are up to speed with what is essential, the Australian Tax Office (ATO) put out a reminder highlighting areas they will focus on this year. Cryptocurrency is on the list, and with good reason. There are numerous misconceptions regarding crypto and your taxes.

To help you learn the way cryptocurrency fits into the tax scheme, consult our guide.

Cryptocurrency Basics You Need to Know

Start with some fundamentals before delving into the finer points of approaching your taxes if you own crypto.

What is Cryptocurrency?

Cryptocurrency (often called crypto) is a digital form of currency. You can purchase, trade, save, or spend cryptocurrency just as you would the Australian dollar. The difference is that no one entity controls crypto, and it has no physical representation.

Cryptocurrency is a purely digital entity. The ATO does not view crypto in the same way it does fiat currency. Cryptocurrency is an asset. Therefore, it is in the category of capital gains tax and not taxed the same way fiat currency is taxed.

How Does the ATO Know I Have Cryptocurrency?

Even though crypto has no physical form, being able to track it is necessary. Information regarding cryptocurrency transactions is recorded in a digital ledger called the Blockchain. Every cryptocurrency transaction that occurs is recorded on the Blockchain.

The ATO can, in fact, track crypto all the way back to 2014. How?

• They have a data matching program with Australian exchanges.
• When you sign up for any Australian exchange or wallet, you need to provide some know your customer (KYC) information which the ATO has access to.

So, even though cryptocurrency is outside of any centralised government control, world governments know it exists and will include it in taxes accordingly. The taxation office is keeping records, and you should, as well.

What Should I Record Regarding My Cryptocurrency?

Your accurate and comprehensive records are vital for tax purposes. The ATO requests that you record the following for each cryptocurrency transaction.

• The date
• The Australian dollar value of the crypto at the time of the transaction
• The reason for the transaction such as a gift, a mining payment, a purchase and so on
• The other party involved in the transaction. As much information you get is good. The minimum information is the other party’s cryptocurrency address
• Exchange records
• Digital wallet records and keys
• Your receipts of purchases and transfers

Your Cryptocurrency Tax Responsibilities

• Maintain meticulous records of every transaction.
• Declare ALL of your gains and losses from cryptocurrency
• If your transactions included a foreign cryptocurrency exchange, you might owe tax to another country

What is Next?

When it is time to work on your taxes, you must:

Report Every Disposal of Cryptocurrency

Disposal of cryptocurrency involves any of the following:

• Trading, gifting or selling crypto
• Exchanging one type of cryptocurrency for another type, for example, swapping Bitcoin for Ripple
• Convert your cryptocurrency to fiat currency, such as cashing in Bitcoin for Australian dollars

Figure Out How Your Cryptocurrency Disposal Impacted Your Capital Gains Situation

To calculate your capital gains (or losses), you need to go through a few steps.

• Determine the value of your cryptocurrency sales, trades, gifts, and purchases in Australian dollars. This amount is known as your Capital Proceeds
• Once you know the value of disposals, you can calculate your capital gains or losses for your taxes
• Add the purchase price of your cryptocurrency and any cost incurred while holding, such as fees for holding or disposing of it. This amount is your Cost Base
• Now subtract the amount you paid (Cost Base) from the amount you earned upon disposal (Capital Proceeds). You will have your capital gains or losses depending on your cryptocurrency’s performance.

Frequently Asked Crypto Questions

• • Is transferring crypto from one wallet to another considered disposal?

If you control both digital wallets, then moving cryptocurrency is not a disposal of crypto, and you do not need to report it.

• • If I swap cryptocurrency with another owner, is that considered disposal?

Yes, if you and another holder of cryptocurrency trade, it is still disposal of your cryptocurrency. The value of your holdings changed when you traded ownership of your assets.

• • Do I pay taxes on cryptocurrency that I purchased in the 2022-2023 tax year?

The laws that govern the taxing of cryptocurrency are confusing. Remember that you only pay when you dispose of it. You do NOT need to pay any taxes on it when you purchase cryptocurrency using fiat currency. If you use a form of crypto currency to make the purchase, it is disposed of. Then it will be subject to tax.

• • Must I pay taxes on the cryptocurrency that I am holding?

Australians do not have to pay taxes on any cryptocurrency they are holding. If you purchase cryptocurrency and keep it for at least one year, you are eligible for a 50 per cent discount on your capital gains tax the following year.

• • How much will my taxes be on my capital gains?

Your tax amount will depend on several factors. You should consult with a tax professional and discuss your unique tax situation for an exact amount.
As the tax filing date comes closer, you need to have what you need organised and ready to submit to the ATO. Understanding how you should report it and how it will affect your taxes can be a challenge if you own cryptocurrency.

If you are struggling with your taxes, it is in your best interest to reach out for assistance. The tax experts at My Tax Refund Today have a complete understanding of tax preparation and know the ways crypto holdings will have on your taxes. The last thing you want to do is make a costly tax mistake. So, don’t go it alone. My Tax Refund Today can help.