Cryptocurrency

Crypto was originally developed as a digital currency to be used similar to money.  Currently in Australia crypto is not widely accepted as a form of payment and is more commonly used as an investment.

Tax treatment of cryptocurrencies

Cryptocurrency is treated very similarly to shares, and is commonly regarded as a capital gains tax asset. A CGT event can occur when disposing crypto and can be in the following forms:

·         Selling crypto for a fiat currency

·         Exchanging for a different cryptocurrency

·         Gifting your crypto

·         Trading crypto

·         Using it to pay for good and services

Trading crypto from one digital wallet to another will not be considered a disposal as long as you maintain ownership over the crypto the whole time.

There are many types of cryptocurrencies (like there are many types of shares) and each is a separate asset for CGT purposes – if one crypto is disposed/traded to obtain another these will be viewed as separate assets. Crypto-assets are entitled to a 50% CGT discount if held for more than 12 months.

Gifting Cryptocurrencies

It is important to note the potential tax implications when cryptocurrency is gifted or received as a gift. Gifting crypto to another person/entity is another form of disposing of crypto and deemed a CGT event and may have tax consequences. Similarly, if you receive crypto as a gift this may be classified as a ‘purchase’. It is important to keep records of all gift transactions and the market values at the time of the event as this will be needed to determine any capital gains/losses for your taxable income.

Determine your CGT

Similar to other assets, when determining if you have a capital gain or loss you must calculate the purchase value, sale value and any fees incurred in Australia dollars.

For more information on how to work out and report CGT on crypto visit the ATO.