New traders told of old rules
The ATO has an important message for Australia’s 600,000 new crypto-traders.
Offical stats show that over half a million Australians have signed up to cryptocurrency trading platforms in the last two years.
Australian Taxation Office assistant commissioner Tim Loh says that with tax time coming back around, it is important to note that in Australia, gains from cryptocurrencies like bitcoin and ethereum are treated like gains from other investments such as shares.
That means Australian must pay capital gains tax on profits they making from trading between different forms of cryptocurrency or converting back into Australian dollars or any other fiat form.
“Generally, as an investor, if you buy, sell, swap for fiat currency, or exchange one cryptocurrency for another, it will be subject to capital gains tax and must be reported,” Mr Loh says.
“CGT (capital gains tax) also applies to the disposal of non-fungible tokens (NFTs).”
“It’s a big mistake to think that because cryptocurrency seems to operate in an anonymous digital world, your transactions won’t be seen.
“We are alarmed that some taxpayers think that the anonymity of cryptocurrencies provides a licence to ignore their tax obligations.”
Since reforms introduced after the banking royal commission, all Australian crypto-exchanges are registered with the anti-money laundering regulator AUSTRAC, meaning they keep detailed records of their users’ identities and trades.
The ATO is tracking the transactions too, matching data from cryptocurrency service providers, banks and other financial institutions to an individual’s tax return.
Mr Loh says users should keep detailed records.
“The best tip to nail your cryptocurrency gains and losses is to keep accurate records, including dates of transactions, the value in Australian dollars at the time of the transactions, what the transactions were for, and who the other party was, even if it’s just their wallet address,” Mr Loh said.
Businesses and sole traders that are paid in cryptocurrency are taxed as income based on the value of the cryptocurrency in Australian dollars at the time of the transaction.
People who regularly use cryptocurrencies to buy and sell goods and services may be able to avoid CGT, while those that hold cryptocurrency for at least 12 months as an investment can be entitled to a CGT discount.
This ATO fact sheet lays out most of a crypto-traders’ requirements and obligations.