Receiving your salary in Bitcoin may sound appealing, but do you have to pay taxes in Australia? With cryptocurrency’s growth and performance over the last few years, more people are making the switch to getting paid in crypto.
The emergence of cryptocurrency payment companies is also helping spread this trend, with people choosing to get paid in Bitcoin and other assets, while remote working also propels this choice.
Is that possible in Australia? This week, we cover all the taxes involved when receiving your salary in Bitcoin or other cryptocurrency, including tax scenarios.
Can I get paid in Bitcoin in Australia?
Yes, you can start receiving your salary in Bitcoin or any other crypto as long as your employer has the ability to conduct the transaction and you both agree to it. Some companies can automatically exchange a percentage of your wages to BTC and send it directly to your wallet.
Do I have to pay taxes if I get paid in Bitcoin in Australia?
Yes, if you receive your salary in Bitcoin in Australia, you have to pay income taxes, which is the exact same tax obligation as receiving a regular salary in AUD. To submit your tax return, you need to record the Fair Market Value (in AUD) of the crypto you receive each month and declare it as ordinary income.
Let’s look at an example.
John makes AUD 90K per year and wants to start receiving his salary in BTC. Since the Bitcoin price varies daily, John will receive a different amount of Bitcoin each month, but always the same Fair Market Value (AUD 7,500 per month).
John, interested in saving time and minimizing complexity, creates a new cold wallet address and connects it to CoinTracking to receive his income. CoinTracking automatically records new deposits made to the address and calculates the FMV at the time it arrives.
At the end of the financial year, John can create an income report using CoinTracking, submitting it as part of his tax return.
Sign-up to CoinTracking today!
How much do you get taxed on crypto?
The ordinary income tax rates in Australia apply if you’re receiving a salary in Bitcoin or any other cryptocurrency.
For 2022, the income tax rate for our example would be 32.5%, assuming that is your total taxable income (after deductions, etc.).
In that example John would pay AUD 19,717 ( $5,092 plus 32.5c for each $1 over $45,000).
Do you pay tax on crypto profit in Australia?
If you later sell the Bitcoin or crypto you received as salary in Australia at a profit, you’ll have to pay capital gains taxes on the difference between the amount declared as income and the sale proceeds.
Let’s imagine that John wanted to sell the first batch of Bitcoin he received in January 2021. He received AUD 7,500 worth of Bitcoin. At that time, 1 Bitcoin was worth AUD 50K. As a result, he received 0.15 BTC in January 2021. In October 2021, John decided to sell his 0.15 BTC since Bitcoin reached a new all-time high at AUD 67K.
John’s cost base in this trade is AUD 7,500 and his sale proceeds are AUD 10,050 (0.15 BTC * AUD 67,000). John will pay capital gains taxes on the difference between his sale proceeds and cost base. In this case, John will pay capital gains taxes on an AUD 2,550 profit.
How to report your Bitcoin salary on taxes in Australia?
Here’s how to report your Bitcoin salary on taxes:
- Determine the Fair Market Value (in AUD) for all the Bitcoin you received as salary.
- Add your total crypto income (all the FMVs received).
- Report your crypto income in your income tax return.
It’s easier to track your crypto salaries by import them into a crypto tax software like CoinTracking, which automatically calculates all your FMVs for you.
Learn how to import your Bitcoin salary into CoinTracking:
The best crypto tax calculator in Australia: CoinTracking
CoinTracking is the best crypto tax software for Australian investors, enabling the importing of trades from hundreds of exchanges, including DeFi/DEXes, Binance Smart Chain, MATIC, NFTs, and more!
CoinTracking can then help you take care of all the crypto tax reporting requirements beyond crypto salaries:
- 25+ advanced reports, including which coins offer you a tax-free rate.
- Automatic capital gains with 12 accounting methods (e.g., FIFO, LIFO, HMRC, ACB).
- Generate complete and compliant tax reports.
Do you have any crypto tax questions? Check Full Service Australia
Cryptocate, CoinTracking’s Australian Full Service Partner and premier Australian crypto tax firm, offers a range of services to assist with your cryptocurrency reporting.
If you have received cryptocurrency as income, as a salary, airdrop, interest, or otherwise, Cryptocate specializes in creating cryptocurrency income and capital gains reports to ensure your tax compliance. Speak to an expert from Cryptocate today by submitting a form on our Full Service page!
*This post is a part of our educational series about crypto taxes in Australia. The article had the support and review of expert accountants from Cryptocate, the CT Full Service provider for Australia.
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.