How are cryptocurrency transactions taxed in Australia?

Whether you’re currently involved in a cryptocurrency like bitcoin, or considering buying a cryptocurrency, it’s vital to explore the tax implications. While these will vary according to your circumstances, and it’s important to seek professional advice, there are some basic tenets you can start with.

Getting started

No matter how you intend to use your cryptocurrency, you must keep accurate records of your buying and selling.

Your records must include:

• transaction date
• the value of the cryptocurrency in Australian dollars
• what the transaction was for and who the other party was, including their cryptocurrency address.

Tax responsibilities

In Australia, cryptocurrency transactions are subject to both income and capital gains taxes. While your digital wallet can contain different types of cryptocurrencies, each one is counted as a separate asset for Capital Gains Tax (CGT).

A Capital Gains Tax event occurs when you ‘dispose’ of your cryptocurrency. Disposal may mean that you:

• sell or gift cryptocurrency
• trade or exchange cryptocurrency
• convert cryptocurrency to fiat currency
• purchase goods or services with cryptocurrency.

If you have transacted with a foreign cryptocurrency exchange you may have tax responsibilities in another country.

Personal asset use

Personal use assets are not generally subject to tax on transactions. Your cryptocurrency use may be regarded as a personal asset if it is kept or used to purchase personal items. This means that capital gains/losses that arise may be disregarded. For example, buying cryptocurrency specifically to purchase an item that can be paid for using cryptocurrency could be considered personal asset use.

It’s important to know that this does not apply if you are buying cryptocurrency as an investment, as part of a profit-making scheme or as part of a business.

Keeping up to date

Cryptocurrency is a rapidly evolving area. It’s important to stay up to date and understand any developments in tax consequences. The ATO has a guide, including examples and links for additional information to help you.

Get in touch. We can explain the ATO’s rules and regulations for your investments and provide guidance for your situation.