Is transferring cryptocurrency taxed in Australia?
This article explore the tax implications of cryptocurrency transfers for Australian investors, including gifting crypto, if transfer fees are deductible, and how to be crypto tax compliant.
Let’s find out.
Do you get taxed for transferring crypto?
Transferring cryptocurrency between personally owned wallets or exchange accounts is not taxed in Australia. As a result, you can send your crypto from one exchange to another, from a hot wallet to a cold wallet (e.g., Trezor), or from one Blockchain address to another without it being considered a disposal, and therefore a taxable event.
However, if you transfer crypto from a wallet you control to another wallet that belongs to a different person, the ATO will consider it a disposal. In Australia, any disposal of cryptocurrency by an investor is a taxable event and subject to capital gains tax.
Cryptocurrency disposed of as gifts have the same treatment as any other disposal of cryptocurrency. The party giving the cryptocurrency is taxed as though they were selling their crypto, while the receiving party acquires a new CGT asset with an AUD 0 cost base.
Let’s look at the treatment of transfer fees after clarifying that transferring cryptocurrency are only taxed if they are also a disposal.
Are crypto transfer fees tax-deductible?
Fees associated with transferring cryptocurrency can be an expense in the acquiring or disposal of the asset. The cost base of the asset will account for the fee amount based on its fair market value at the time you made the transfer.
Do you have to pay taxes on crypto transactions?
It is important to make the distinction between crypto transactions and cryptocurrency transfers. Cryptocurrency transactions occur when you convert any digital asset to FIAT (e.g., AUD), to another cryptocurrency, or dispose of cryptocurrency (e.g., gifts). Those are all taxable events in Australia.
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Crypto transfers happen when you send crypto from one personal wallet to another or from one exchange account to another. Those operations are not taxable events in Australia.
Crypto transactions are different from crypto transfers and are, therefore, taxable. On the other hand, transferring crypto between personal wallets is not taxed in Australia.
Do you pay taxes when buying crypto?
No. Purchasing crypto with FIAT (e.g., AUD) is not a taxable event and, therefore, not taxable. However, fees associated with purchasing the cryptocurrency can be added to the cost base of that asset, which reduces capital gains. Moreover, holding crypto without selling a portion of it is not a taxable event.
However, if you sell any portion of your crypto or gift it, you’ll have a taxable event in Australia.
Let’s look into this in more detail with a real-life scenario on how transferring crypto between wallets is taxed.
Is transferring cryptocurrency to a wallet taxed? A real life example
Let’s imagine that Marie bought 1 BTC at AUD 30K in December 2020.
In January 2021, Marie sent 0.5 BTC from her wallet on Binance to a recently purchased Trezor cold wallet.
Marie paid a 0.001 BTC transferring fee at the time. In January 2021, 1 Bitcoin was AUD 40K. As a result, Marie paid AUD 40 to transfer her crypto, and the cost base of her Bitcoin is now AUD 30040.
Maries’s crypto transfer is not a taxable event in Australia. However, she can add the transfer fee to the cost base of the asset and reduce her taxes upon its sale.
Is sending someone Bitcoin taxable?
Let’s imagine that Marie (from the previous example) wants to send some of her Bitcoin to a friend. In March 2021, Marie sent 0.1 BTC from her Binance account to her friend’s address. Bitcoin’s price was AUD 50K at that time, and the transferring fee was 0.001 BTC.
Gifting crypto is taxable in Australia. As a result, the 0.1 BTC gift is a disposal of crypto, resulting in capital gains tax. The sales proceeds were AUD 5,000 (0.1 BTC * AUD 50K), with a $50 fee (0.001 BTC * 50000 AUD), which can be deducted from the proceeds, resulting in a $4950 in proceeds. The cost base is AUD 3,004 (0.1 BTC * AUD 30004 since her adjusted cost base is $30040 to include the transfer fee).
As a result, Marie has a capital gain of 1,946 AUD, which she’ll have to report and pay the appropriate capital gains taxes on. Since she held for less than 12 months, she won’t have any tax benefits on the capital gains rate.
How can I reduce capital gains tax in Australia?
You can reduce your crypto tax bill in Australia by holding your crypto for more than 12 months, effectively reducing your capital gains tax by 50% when you end up selling the crypto.
Long-term holding can have tax benefits across countries, reducing the effective tax rate, including Australia. Finally, you can consider the top 5 crypto tax-friendly countries to where you can consider moving.
Is moving crypto from one wallet to another taxable? The final word
No. Moving crypto from one wallet to another is not a taxable event in Australia.
However, trading crypto for FIAT/crypto or gifting crypto are taxable events in Australia, subject to capital gains taxes.
How to keep track of crypto for taxes?
There are crypto tax reporting requirements when you trade crypto in Australia.
You must keep updated records of your crypto trades, including the amount sold, the price at which you sold the coins, the gain/loss for each trade, and the date of the transaction.
For tax purposes, you should keep your crypto trades updated during the year to facilitate your tax season. Fortunately, CoinTracking can help you manage all your crypto reporting in a few simple steps.
How to do crypto taxes in Australia?
You can do your crypto in Australia in 3 steps:
- Import your crypto trades, including DeFi and NFTs, into CoinTracking.
- Get your gains automatically calculated based on ATO-approved accounting methods.
- Create fully compliant and ready-to-go tax reports for inclusion in your tax return.
Australian crypto tax calculator: 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:
- 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 tax reports.
Learn how CoinTracking automatically calculates your crypto gains:
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 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.