Save
What you need to know about the tax implications of crypto
One million Aussies are now invested in crypto, but many have not thought about how these investments will affect them at tax time.
What you need to know about the tax implications of crypto
One million Aussies are now invested in crypto, but many have not thought about how these investments will affect them at tax time.
Recent research from Roy Morgan indicated that 5 per cent of the population now owns at least one cryptocurrency with an average investment of just over $20,000 each.
With tax time fast approaching, H&R Block director of tax communications Mark Chapman said that Aussie crypto investors should be thinking about the tax implications of their investments.
“It’s surprising how many people go into crypto investment and simply don’t consider the tax implications,” he said.
One misconception highlighted by Mr Chapman is that taxpayers can buy up to $10,000 of cryptocurrency and avoid paying capital gains tax (CGT) by taking advantage of the personal use exemption.
"This exemption only applies where the cost of the cryptocurrency does not exceed $10,000 and you can demonstrate that the cryptocurrency was to fund genuine personal consumption, such as paying for a holiday, a car, your wedding, etc,” explained Mr Chapman.
“Mistakenly relying on this exemption is one of the biggest reasons people fall foul of the ATO; expect to be asked to provide proof that you either did – or intended to – use your cryptocurrency to fund personal spending on goods and services.”
If the cost of a crypto-asset exceeds $10,000, the personal use exemption will not be available to the taxpayer and CGT will apply regardless of whether the asset was for personal use.
Mr Chapman said that the disposal of crypto would generally be subject to CGT, which is calculated based on the difference between the amount an individual paid for the asset and the amount they disposed it for.
Disposal can include selling, exchanging, gifting or trading crypto as well as using crypto to pay for goods and services.
“Any profit is subject to CGT, which can potentially be discounted by 50 per cent if you hold your crypto-asset for more than 12 months. If you have undertaken many trades during the year, this could make calculating gains and losses difficult,” noted Mr Chapman.
However, if an individual has acquired crypto to trade it, they could be considered to be running a business of crypto trading. If this is the case, Mr Chapman indicated that the individual would instead need to pay income tax on the business profits.
“If you buy and sell cryptocurrency on a regular basis with a view to making a profit, then the profits on disposal of the cryptocurrency will not be subject to CGT but will be assessable income since you will be regarded as a trader rather than an investor,” he said.
“It can be a fine line between being an investor and a trader – broadly speaking if you are turning over your cryptocurrency every few days chasing profits, you have many transactions and you are running a business-like structure you will be a trader. If you are holding the cryptocurrency with a view to long term gain, you are likely to be an investor.”
Due to the complexity of crypto investing and trading, Mr Chapman suggested that individuals should use a tax agent who understands the appropriate tax implications.
“H&R Block, for example, uses CryptoTaxCalculator, a software program that is able to consolidate all digital transactions across multiple wallets, to calculate capital gains and losses of the previous year, and what your tax on each trade may be,” he added.
RELATED ARTICLES
Tax saving
Navigating tax laws for capital gains in 2023
The landscape of Australian tax laws surrounding capital gains is ever-changing, with 2023 being no exception. Read more
Tax saving
Welfare overhaul could give recipients a leg-up
Australia’s Centrelink recipients who’ve been doing it tough are in for a potentially easier time if the federal government pursues ambitious reforms that could provide sturdier safety nets. Read more
Tax saving
Students should think twice before tapping into their super
Former students might want to think carefully before they look to take advantage of the federal government’s biggest first home buyer incentive. Read more
Tax saving
Advocates call for an end to tax cuts
Social services sector advocates have warned that further tax cuts may make solving Australia’s biggest challenges much harder. Read more
Tax saving
ATO and AUSTRAC may gain new phone-tapping powers
A proposed update to electronic surveillance legislation could see the ATO armed with new powers that would allow the agency to bug phones and intercept online communications. Read more
Tax saving
Over 2m Aussies asked the TPB for help during the last year
As the economy recovers, Australia’s tax regulator says it’s planning to put unregistered practitioners under the microscope. Read more
Tax saving
Will you pay higher taxes due to bracket creep?
Bracket creep will see Australians paying more tax on average, unless further cuts are introduced in the future. Read more
Tax saving
10 ways to reduce your tax bill
With the tax return deadline only one month away, these tips could help minimise your tax bill. Read more
Tax saving
Navigating tax laws for capital gains in 2023
The landscape of Australian tax laws surrounding capital gains is ever-changing, with 2023 being no exception. Read more
Tax saving
Welfare overhaul could give recipients a leg-up
Australia’s Centrelink recipients who’ve been doing it tough are in for a potentially easier time if the federal government pursues ambitious reforms that could provide sturdier safety nets. Read more
Tax saving
Students should think twice before tapping into their super
Former students might want to think carefully before they look to take advantage of the federal government’s biggest first home buyer incentive. Read more
Tax saving
Advocates call for an end to tax cuts
Social services sector advocates have warned that further tax cuts may make solving Australia’s biggest challenges much harder. Read more
Tax saving
ATO and AUSTRAC may gain new phone-tapping powers
A proposed update to electronic surveillance legislation could see the ATO armed with new powers that would allow the agency to bug phones and intercept online communications. Read more
Tax saving
Over 2m Aussies asked the TPB for help during the last year
As the economy recovers, Australia’s tax regulator says it’s planning to put unregistered practitioners under the microscope. Read more
Tax saving
Will you pay higher taxes due to bracket creep?
Bracket creep will see Australians paying more tax on average, unless further cuts are introduced in the future. Read more
Tax saving
10 ways to reduce your tax bill
With the tax return deadline only one month away, these tips could help minimise your tax bill. Read more
More articles
OUR PLATFORMS AND BRANDS
- Accountants Daily
- Accounting Times
- Adviser Innovation
- Australian Aviation
- Broker Daily
- Cyber Daily
- Defence Connect
- Fintech Business
- HR Leader
- Independent Financial Adviser
- Investment Centre
- Investor Daily
- Lawyers Weekly
- Money Management
- Nestegg
- Property Buzz
- Real Estate Business
- Smart Property Investment
- SMSF Adviser
- Space Connect
- Super Review
- The Adviser
- Wellness Daily
- World of Aviation
EVENTS AND SUMMITS
- Accountants Daily 30 Under 30 Awards
- Adviser Innovation Summit
- Australian Accounting Awards
- Australian Aviation Awards
- Australian Broking Awards
- Australian Defence Industry Awards
- Australian Law Awards
- Australian Space Awards
- Australian Space Summit
- Better Business Summit & Awards
- Broker Daily Business Awards
- Corporate Counsel Summit & Awards
- Cyber Security Summit & Awards
- Defence Connect Budget Lunch
- Defence Connect DSR Summit
- Fund Manager of the Year Awards
- ifa Excellence Awards
- ifa Future Forum
- Investor Daily ESG Summit
- Lawyers Weekly 30 Under 30 Awards
- Lawyers Weekly Women in Law Forum
- New Broker Academy
- Partner of the Year Awards
- REB Awards
- Reinnovate
- SME Broker Bootcamp
- SMSF Adviser Technical Day
- Super Fund of the Year Awards
- Women in Finance Awards
- Women in Law Awards
- Accountants Daily Podcast Network
- Australian Aviation Podcast Network
- Broker Daily Podcast Network
- Defence Connect Podcast Network
- HR Leader Podcast Network
- REB Podcast Network
- Relative Return
- Space Connect Podcast
- The Adviser Podcast Network
- The ifa Show
- The Lawyers Weekly Show
- The Smart Property Investment Show
PODCASTS
LEARNING AND EDUCATION
MOMENTUM MARKETS NETWORK
LINKS
STAY CONNECTED
Make your nest egg grow. Register now for nestegg updates.