Cryptocurrency: the ATO and crypto tax

You may be surprised to find around a quarter of Australians own cryptocurrency - and this number is growing as the types of crypto develop and evolve. Recently the ATO has had their focus on crypto, so it’s important to understand the position of the ATO on crypto tax and the consequences of owning cryptocurrencies.​

In this article, we’ll go through:​

Crypto assets are an asset class which includes cryptocurrency, digital tokens and coins. They are not physical assets like coins or notes, but rather digital tokens stored in a digital ‘wallet’. These digital tokens rely on cryptography and technology such as blockchain for security and other features.​

 There are different types of crypto assets. Here are some of the more popular ones at the moment:​​

Assets that are designed to act as a medium of exchange with transfer enabled on blockchains. Cryptocurrencies have no intrinsic value and are worth as much as people are willing to pay for them.​

Examples: Bitcoin, Ether, and Litecoin.​

This is an individual crypto asset which cannot be replicated – it’s one of a kind. An example is a piece of artwork in digital form. These things can go for serious money – check out this collage created by Beeple – it sold by Christie’s for $69m USD in March 2021.​

Examples: In-game avatars, digital/ non-digital collectables, tickets, and domain names.​

A marketing term for crypto that uses a specified asset or basket of assets to maintain a stable value. These assets include such things as a currency like the USD, gold, equities, bond or other crypto.​

Examples: Tether, USDC, TrueAUD, and DAI.​

DeFi (decentralised finance) coins or DeFi tokens are digital assets that can be bought, sold, and traded using decentralized solutions called DApps.​

Examples: UNI, LINK, MKR, and COMP.​

People will usually fall into one of the trader types below:​

You will usually have good records from when you started, and understand that you need to pay tax on profit.​​

If you’re involved in yield farming or staking, you’re likely to want regular returns on your investment rather than waiting for the pure gain upon sale. Yield farming usually means your crypto assets are provided via a Decentralised Finance System (DeFi), which should provide you with the detailed records you need for tax purposes.​

This is where you’re not actually trading crypto – your taxable income shouldn’t be too difficult to determine here, as there will only be a few transactions.​​

If you’re at this level, you’ll have an understanding of the tax implications of Crypto and use specialised software to keep track of holdings and calculate tax.​​

The majority of traders tend to dabble, investing and transferring their holdings on an ad-hoc basis. In our experience, we have found that these types of investors do not always keep accurate records (if any), or understand the tax implications of trading in crypto assets.​​

As per the ATO and crypto tax laws, you are responsible for both preparing your own records and providing them to your accountant at year-end. Your Beany accountant can provide you with more information on how we can support you with cryptocurrency.​

Ultimately, the responsibility lies with you to provide the ATO with the correct information. ​​

For tax purposes, crypto assets are not a form of money. Crypto assets are seen as property and fall under the Capital Gains Tax (CGT) regime. The way you use or transact with crypto assets will determine how you treat them for tax purposes.​

As a general rule for investors:​

If you acquire a crypto asset as an investment, transactions such as disposal or exchange or swap are a CGT event (see below) and you may make a capital gain or loss and record these in your tax return.​

You can't deduct a net capital loss from your other income. You may be able to reduce capital gains using the CGT discount.​

In general, a CGT event happens when you dispose of a CGT asset. For the purposes of crypto assets, this could be when you:​

Yes, as the ATO has crypto tax data-matching programs which receive information from share registries and crypto asset exchanges.​

The data is used to identify the buyers and sellers of crypto assets, including addresses, phone numbers, names, bank accounts, transaction dates and coin types.​

As long as both wallets are under your name then there’s no tax to pay on your personal transfers. However, you have to keep track of the original cost of the transferred coins and have sufficient proof of it.​

Moving coins between wallets won’t hide the original amount you paid from your records and won’t change your total capital gains or losses.​

Capital losses on crypto can be offset against capital gains made in the same financial year or carried forward to be offset against future capital gains. Capital losses can be carried forward indefinitely until they are used (it’s important to declare these on your tax return).​

You can’t use capital losses to offset against other forms of income such as salary or wages.​

Yes, any swap or exchange of cryptocurrencies is a taxable event in Australia. For example, if you exchange Litecoin for Ripple, the ATO and other tax agencies will treat this as a sale (disposal) of Bitcoin at the market price you received at the time.​

You will need to value your crypto asset in Australian dollars to calculate the capital gain or capital loss. To work out the value of your crypto assets when you acquire or dispose of them, you can use the exchange rates on a reputable digital currency exchange at the time of the transaction to work out the value of your crypto assets.​

To work out your capital gain, it is important to keep records for each crypto asset and your transaction. The ATO provides a detailed list here. ​

As we mentioned earlier, there is currently no specific legislation or case law on crypto assets. You can bet it’s coming though. Here are some of the links to ATO literature. We don’t expect you to read them (all) – just get an idea of the work involved when calculating your taxable income from crypto assets.​​

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