Is there a cryptocurrency tax in Australia?
Today, we explore all the tax implications of trading cryptocurrency in Australia, crypto tax reporting requirements, and how to keep track of your trades and be fully compliant.
Crypto has become increasingly popular in Australia, with many companies developing exchanges for Australians to buy and sell crypto while accessing the most famous platforms worldwide.
But, how is cryptocurrency treated from a regulatory perspective in Australia? Do you incur in taxes when buying or selling crypto in Australia? If there are taxable events, what kind of tax do you pay? Is there a cryptocurrency tax in Australia?
Let’s find out.
Do you pay tax on cryptocurrency Australia?
In Australia, cryptocurrency is considered property for tax purposes, and it has been legal since 2017. As in other advanced tax regimes (e.g., US, UK), the Australian government taxes cryptocurrency as property, with individuals incurring a capital gains tax setting when investing.
But, what kind of crypto trades are taxable events in Australia?
According to the Australian Tax Office (ATO), every crypto-to-crypto and crypto-to-FIAT trade is a taxable event. What does it mean?
Every time you sell any of your cryptocurrencies for FIAT (e.g., Australia Dollar), you’ll have to pay capital gains taxes from the profit on the sale. Furthermore, when you sell any of your cryptocurrencies for another, you also have a taxable event, subject to capital gains taxes.
For example, you bought Bitcoin and then swapped it for Ethereum. Even though you didn’t cash out into FIAT, you’ll still have to report that trade, access the capital gain, and pay the accurate level of taxes.
These capital gains tax scenarios on crypto-to-crypto and crypto-to-FIAT trades apply to individuals who purchase cryptocurrency as an investment, and it is not your main professional activity. If you’re trading crypto professionally (e.g., trader), your cryptocurrency activity is taxed under trading stock rules, with profits assessed as ordinary income instead of capital gains.
In this guide, we’ll cover all the tax implications from the perspective of an investor: someone who invests in crypto as a hobby and not as a professional trader.
Is buying cryptocurrency taxable in Australia?
In short, no. Buying any crypto is not a taxable event in Australia.
However, when you sell any portion of your crypto holdings, you’ll have a taxable event there, subject to capital gains if it is an investment and not for personal use.
Is holding crypto taxable in Australia?
No. Buying and holding any crypto in Australia is not a taxable event. You can hold your crypto for as much time as you want without incurring any taxable event. However, if you make any operation (e.g., selling it), you’ll have a taxable event in Australia.
How much tax do you pay on cryptocurrency?
If you buy a cryptocurrency and sell it as an investment in Australia, you’ll be subject to capital gains taxes. Your capital gains are the difference between the cost base and the total sales proceeds on each trade and are taxed at your income tax rate.
Let’s see an example.
In December 2020, you bought 1 BTC for AUD 25K. In April 2021, you sold 1 BTC for AUD 55K. Your cost base is the fair market value (measured in AUD) when you acquired that 1 Bitcoin (25K AUD). The total sales proceeds are the amount you’re receiving when selling that 1 Bitcoin (AUS 55K).
As a result, the capital gains will be the difference between the two. Hence, you’ll have a capital gain of AUD 30K (AUD 55K-25K) to report.
The same calculations are necessary each time you convert one cryptocurrency for another cryptocurrency. You have to access the FMV of the original crypto you purchase and the sales proceeds (in AUD) when you sell it. The difference between the two is your capital gain.
Let’s see another example.
Are crypto to crypto trades taxable?
In December 2020, you bought 1 BTC for AUD 25K. In May 2021, 1 Bitcoin was worth AUD 60K, and you sold it for 20 ETH ( each ETH was worth AUD 3K).
Your cost base is the fair market value of your initial purchase: AUD 25K. You’re disposing of your entire holdings for another cryptocurrency. The market value of the 20 ETH is AUD 60K, so that’s your sales proceeds, and also the new cost base for the 20 ETH.
As a result, your capital gains will be the difference between the cost base and the sales proceeds. In this case, AUD 35K (60K-25K). It is important to note that it is your Net Capital Gains that are taxed, which is the total gain after any losses have been accounted for. Capital gains are taxed at your income tax bracket, and your tax bracket is determined by your total income net capital gains. For example, if you earned AUD 80K income and made an AUD 35K net capital gain, you would be taxed in the $120,001 – $180,000 bracket.
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How do you avoid tax on crypto Australia?
There are 2 ways to minimize tax on crypto in Australia:
- Hold your crypto for more than 12 months (long-term)
- Offset your capital gains with other losses or tax benefits
You can reduce your crypto tax bill legally. What are the most straightforward strategies to avoid paying so much capital gains?
If you’re buying and selling crypto as an investment, consider planning to hold your assets for over 12 months before selling them. Assets held for 12 months or more can have a 50% capital gains tax discount applied to any gains resulting from their proceeds. If you hold crypto for more than 12 months before selling it, you’ll be eligible for that discount and significantly reduce your crypto taxes. This tax benefit for long-term holders is present in other countries.
If you have losses from other trades, you can also realize them, and they will offset the capital gains tax you have from other profitable trades. It is important to note that selling your asset to realize a gain and then rebuying the asset is “wash trading” in Australia and is illegal.
Check our guide on top crypto-tax friendly countries if you’re looking to move for tax purposes.
Can the ATO track cryptocurrency?
In summary, yes. As in other countries, the tax authorities work to identify taxpayers who haven’t reported their crypto activities. Tax authorities like the ATO have many ways of collaborating with companies in the crypto space and other financial institutions to determine if a taxpayer should have reported crypto on their taxes.
As ATO’s assistant commissioner puts it, ATO “closely tracks where it interacts with the real world through data from banks, financial institutions, and cryptocurrency online exchanges to follow the money back to the taxpayer.”
The hassle-free way of dealing with this is to accurately report every trade you make and report it at the end of each tax year.
How to report crypto taxes in Australia?
In Australia, you have to keep track of every crypto trade you make. Ideally, you need to access the fair market value of each purchase and sale, the time at when those occurred, and the exchanges/wallets that receive/send your crypto. You’ll need to report the gain/loss for each trade you had in the tax year.
Manually tracking all your trades can be a nightmare. To solve that, we’ve created the best crypto tax software in Australia, CoinTracking, where you can import all your trades in a few minutes, have all your gains automatically calculated, and generate compliant tax returns.
Tax on cryptocurrency: Australia
How is crypto taxed in Australia? Top 6 tax implications to be aware of:
- Crypto-to-FIAT (Australian Dollars) trades are taxable events in Australia
- Crypto-to-crypto trades are taxable events in Australia
- Any crypto sale (for crypto or FIAT) made as an investment from an individual is subject to capital gains taxes
- Buying crypto and only holding it is not taxable
- You can offset your tax bill by long-term holding (more than 12 months) before selling your crypto
- You have to report each crypto gain/loss for each fiscal year.
How to do crypto taxes in Australia?
You can make your crypto tax life in Australia much easier by:
- Import your trades from your favorite crypto exchanges with CoinTracking
- Calculate capital gains according to ATO-approved accounting methods
- Generate ATO-ready tax returns with easy-to-use crypto tax software
Australian Crypto Tax Calculator: CoinTracking
CoinTracking is the best crypto tax software for Australian traders, making it easy to import all your trades from 110+ exchanges/wallets, including DeFi, and NFTs.
After importing your trades, CoinTracking calculates the gains/losses for every trade, according to the accounting method used in Australia. Finally, CoinTracking generates the necessary tax returns for each year.
Do you have any crypto tax questions? Check Full Service Australia
CoinTracking also offers a full service for Australian traders. A CoinTracking expert from Cryptocate, a premier Australian crypto tax firm, will review your account, fix any errors, and ensure you submit your tax returns error-free.
*This post is a part of our educational series about crypto taxes in Australia, with the review of premier crypto tax firm, Cryptocate.
Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.