Stats show that one in four people invest in crypto in Australia. Cryptocurrencies are classified as digital assets in Australia. This is why they are subject to the same tax laws as other digital assets, such as shares and property. When you sell or trade cryptocurrencies, you need to report your income tax return profits or losses.
Investors can claim tax deductions for any expenses associated with the crypto transactions. It’s best to refer to resources like the Swyftx tax guide before you start trading in crypto.
How to Report Crypto Transactions?
The Australian Tax Office (ATO) has issued guidelines on reporting crypto transactions in your tax return. You need to declare all profits and losses in Australian dollars. You can use the ATO’s currency converter to work out the value of your cryptocurrencies in Australian dollars at the time of the transaction.
If you hold cryptocurrencies as an investment, you must declare their disposal’s capital gain or loss. You can use a Capital Gains Tax calculator to calculate your tax liability.
If you receive cryptocurrency as payment for goods and services, don’t treat it as a barter transaction. Treat it as a payment for the sale of goods and services in Australian dollars.
You can include the price of the cryptocurrency in your turnover for Australian Goods and Services Tax (GST). You can also claim Australian input tax credits for any GST you paid on your business purchases related to these transactions.
How Can You Minimise Your Crypto Tax?
To minimise your crypto tax, you need to keep records of all your crypto transactions. These records include the date, amount in Australian dollars, and purpose of the transaction. You can use a crypto tax calculator available on crypto exchange sites to work out your tax liability.
It is possible to reduce one’s tax bill by claiming deductions for any expenses related to your crypto transactions. These include:
- The fees charged by the cryptocurrency exchange, which you paid in connection with buying or selling bitcoins
- Any commissions for transferring Australian dollars from your bank account to a cryptocurrency exchange and vice versa
- Telephone expenses for discussing cryptocurrency trading with an overseas-based associate. You need to keep records of phone call minutes
- Any repair costs for cryptocurrency-mining equipment, which you used to earn income
You can only claim a deduction for an expense if it’s directly related to earning your crypto income. You must list all of your crypto holdings on the Capital Gains Tax worksheet section in your income tax return. You may attract a fine for not filing your tax return correctly if you don’t.
As cryptocurrencies are still a relatively new asset class, the ATO assesses how they should be taxed under Australia’s existing laws. More guidance in this matter is expected from the government in the future.
What if Your Crypto Transaction is Classed as Speculation?
As per resources like the Swyftx tax guide, your crypto transactions might be treated differently if they were made for the primary purpose of making a profit or loss on disposal. You can use this method to report cryptocurrency transactions if:
- You acquired cryptocurrencies with the sole intention of disposing of them; and
- Your holding period didn’t extend beyond 30 days.
The ATO is currently reviewing this guideline. In case you receive a notice from the ATO for crypto transactions treated as gambling or speculation, it is important to seek expert advice.
What if Your Crypto Transaction Involves GST?
You’ll need to include GST in the price of any goods and services that you buy using cryptocurrencies and pay GST on any goods and services you provide in return for the cryptocurrency.
What if You Didn’t Report Your Crypto Transactions?
You’ll need to inform the authorities about any previously unreported crypto transactions in your income tax return. You must be careful of not reporting your crypto transactions on time as you might have to pay the penalty if you don’t.