If you’re an Australian who is interacting with crypto-assets, you should take some time to understand how it affects your tax obligations.
The below guide has been authored by Crypto Tax Calculator. It’s designed to give you a general idea of what events and transactions typically generate a taxable event. The guide is not comprehensive. Getting advice from a qualified accountant is strongly recommended.
- What Kind of Tax Do You Pay on Crypto in Australia?
- Can the ATO Track Crypto Activity?
- Crypto Capital Gains Tax (CGT)
- Crypto-to-Crypto Exchanges
- Staking Rewards & Airdrops
- Forks & Chain Splits
- Gifts & Donations of Crypto
- Lost, Stolen or Hacked Crypto
- Crypto as a Personal Use Asset
- Record-Keeping Requirements
What Kind of Tax Do You Pay on Crypto in Australia?
In Australia, individuals transacting with crypto may generate tax obligations in the form of either capital gains tax (CGT) or income tax.
The type of tax, as well as how much tax you’ll pay, will depend on various factors such as whether you’re trading as an individual or a business.
Can the ATO Track Crypto Activity?
The simple answer is yes, the ATO can track an individual’s crypto activity. You can read more about the development of their tracking process here, but the main takeaway is that they can.
The ATO uses a cryptocurrency data-matching program to scrutinise crypto transactions and account information from centralised exchanges, which provide the ATO with things like names, addresses, and phone numbers. On top of this, they also provide transaction details such as values, bank account details, transaction dates and asset types.
If you’ve ever engaged with a centralised exchange (e.g. CoinSpot, Coinbase, Binance), the ATO will know you have engaged with crypto.
Crypto Capital Gains Tax (CGT)
CGT is tax paid on a capital gain made from the sale of an asset when a disposal occurs. The gain is calculated by finding the difference between the price of which the asset was disposed of (capital proceeds), and the price it was purchased for (cost basis).
The ATO has outlined the following number of crypto transaction types that incur CGT:
- Selling a crypto-asset
- Gifting a crypto-asset
- Trading or exchanging a crypto-asset for another crypto-asset
- Converting a crypto-asset into fiat currency
- Buying goods or services with a crypto-asset
If you partake in any of the above, your transaction/s may be considered by the ATO to be subject to CGT.
The ATO considers exchanging one crypto-asset for another to be a CGT event, meaning you’ll need to track the market value in Australian dollars at the point of disposal and account for each transaction at tax time. More examples of how to do just that.
Non-Fungible Tokens (NFTs)
The ATO recently clarified that “the tax treatment of NFTs follows the same principles as cryptocurrency.” This means that NFTs are treated as an asset, and as such, are subject to the same CGT rules.
This means that the following activity will likely trigger a CGT event, and must be tracked for tax purposes:
- Selling NFTs in exchange for crypto
- Exchanging an NFT for another NFT
- Giving an NFT as a gift
If you’re an NFT creator, Income Tax can also come into play. When you sell NFTs with the goal of making a profit, the ATO states that any profits made will be subject to income tax. Similarly, if you run a business where you create and sell NFTs, any profits made will be subject to business income tax.
Staking Rewards & Airdrops
The ATO clarified its stance on both staking rewards and airdrops in July 2022. Any income earned from staking rewards will not incur CGT, but instead will be assessable as ordinary income. If you go on to sell the rewards earned from staking, then CGT becomes applicable once again.
As for airdrops, the ATO states that the money value of an established token received through an airdrop will similarly be taxed as ordinary income for the user at the time of receipt.
For both staking rewards and airdrops, you will need to find the market value of the assets you’ve received, at the time you received them, in order to declare it as ‘other income’ for tax purposes.
Forks & Chain Splits
We’re all familiar with hard forks, chain splits and the like. Luckily for us, the ATO has confirmed that you do not receive ordinary income or make a capital gain as a result of receiving a new cryptocurrency from either of these types of events.
However, if you choose to dispose of this new crypto you’ve received, the transaction will be subject to CGT. When calculating the capital gain (or loss) value, the cost basis of the new cryptocurrency received as a result of a hard fork or a chain split is $0.
Gifts & Donations of Crypto
Unfortunately, regardless of how altruistic you’re being, gifting or donating a crypto-asset is considered by the ATO to be a disposal event. This means that the transaction would be subject to CGT. As with any CGT event, you’ll need to know the value of your crypto-assets at the time you dispose of them to record for tax purposes.
Suppose you’re donating crypto and are looking to claim the donation as a tax deduction. In that case, you’ll need to find out if the receiving organisation/fund is equipped to accept crypto donations and make sure to transfer the crypto-assets into the recipient’s legal name. You’ll also need to make sure that your crypto donation meets all the usual gifts and donations conditions as set by the ATO.
Lost, Stolen or Hacked Crypto
This past year in crypto has been wrought with more than anyone’s fair share of rugs, liquidations, bankruptcies… On a slightly brighter note, the ATO gives people the opportunity to declare any lost, stolen, or hacked crypto as a capital loss if its meets their level of required evidence.
Any example of evidence to provide to the ATO if you’ve lost access to your private key for example is outlined below:
- When you acquired and lost the private key
- The wallet address that the private key relates to
- The cost you incurred to acquire the lost, stolen, or hacked cryptocurrency
- The amount of cryptocurrency in the wallet at the time of loss of private key
- That the wallet was owned by you, for example by showing transactions linked to your identity
- That you are in possession of the hardware that stores the wallet
- Transactions to the wallet from an exchange for which you hold a verified account and/or are linked to your identity
Crypto as a Personal Use Asset
According to the ATO, a capital gain is disregarded if both the crypto-asset is:
- A personal use asset
- Was acquired for less than $10,000 AUD
To determine if your crypto-asset is considered a ‘personal use asset’, the ATO will consider the time between acquisition and use as well as other factors. As a general rule, the longer you hold your crypto-asset, the less likely it is that the ATO will consider it to be a personal use asset.
The ATO has stated that a crypto-asset is NOT a personal use asset if it’s kept or used mainly:
- as an investment;
- in a profit-making scheme; or
- in the course of carrying on a business.
The ATO has also provided an example of how an NFT could be considered a personal use asset. If your crypto-asset doesn’t meet the necessary criteria to be considered a personal use asset, it will be subject to any relevant taxes.
Irrespective of whether you are a business, investor, or just a beginner in the world of crypto, it’s vital that you maintain records of all of your transactions for tax purposes. Records can be requested by the ATO, and generally need to be held for a minimum of 5 years after the transaction in question.
The records necessary include the following:
- The date of the transactions
- The value of the crypto-asset in Australian dollars at the time of the transaction
- What the transaction was for and who the other party was
- Receipts of purchase or transfer of crypto
- Exchange records
- Records of agent, accountant, and legal costs
- Digital wallet records and keys
- Software costs related to managing your tax affairs
If the thought of manually keeping records of each and every transaction you ever make sounds like the most painful prospect in the world, you can use crypto tax software to help streamline the process.
Disclaimer: Collective Shift was not paid or remunerated in any way for this report nor do we have a referral or affiliate program of any kind.