Crypto trading has taken the investment market by storm over the last few years. Today, over 600,000 Australians hold some form of cryptocurrency.
According to a survey, the most popular cryptocurrency in the country is Bitcoin which is owned by about 9% of the population, while around 8% of Australians were found to own Ethereum and 5% Dogecoin. No one can deny crypto is here to stay. But when the time comes to pay crypto tax, how do you go about filing your crypto taxes in Australia?
This blog post will explain everything you need to know about crypto tax laws in Australia.
Tax Laws Associated With Cryptocurrency
The ATO advice is that crypto gains should be treated in the same way as barter transactions. If crypto is received in exchange for goods and services, it’s considered a form of payment or income and is taxable as per Australian laws. Any crypto transactions using Australian dollars are subject to the Goods and Services Tax (GST).
If crypto is held as an investment, any capital gains or losses would be taxed at capital gains tax rates. Also – crypto mining may be treated as gambling if the crypto being mined doesn’t have any utility value on its own, i.e. you can’t use it to buy anything.
What Does It Mean?
If you’ve made crypto gains, mining, or trading in Australia, you may need to declare it on your taxes by filing a crypto tax return.
Cryptocurrency has been declared property for taxation purposes, not foreign currency, under special rules. That makes it subject to capital gains tax (CGT) as per crypto tax laws in Australia.
At current exchange rates, any Bitcoin purchase for $10,000 after 1 July 2017 will attract CGT if it is later sold for more than $10,000. The revenue generated from crypto-related transactions will be insignificant compared with what the ATO expects to collect from the new tax on crypto assets.
What Sort of Crypto Gains Do You Need to Report on Crypto Taxes?
If crypto is bartered for goods and services (i.e. crypto to crypto transactions), the crypto received or gained needs to be declared as income. GST will need to be paid on crypto-to-crypto transactions if the value of the crypto barter exceeds AUD 10,000.
Any crypto acquired through mining activities may also be subject to GST. Crypto isn’t considered foreign currency (or cash) under Australian tax law – it’s treated as property instead for most purposes, including CGT gain/loss assessments.
The good news with this is that capital gains tax doesn’t necessarily mean you’ll have to pay tax each time you buy or sell crypto using fiat (mainly because there are no transaction fees when you trade crypto).
CGT Asset Exemptions
Most crypto is considered a CGT asset, with some exceptions. These include crypto acquired in exchange for fiat currency (such as bitcoin purchased using Australian dollars), and crypto is directly attributable to an existing CGT asset (i.e. crypto received instead of dividends).
Crypto-to-crypto transactions are taxable if the value exceeds AUD 10,000. There are no transaction fees involved with crypto to crypto exchanges, which are more common than bartering crypto for goods or services.
One-day specific tokens may become integrated into financial products such as contracts for difference, but this isn’t clear yet. Capital gains tax rules apply if crypto mining involves making a profit, in which case, crypto mining may be treated as any other business activity.
Tax laws apply equally to everyone, so all Australian citizens will need to declare their crypto gains on their tax returns or face penalties from the ATO if brought under scrutiny by a random audit.