With Bitcoin at an all-time high and with the ever-increasing adoption of Cryptocurrency by large institutions and individuals alike, the ATO has re-iterated to taxpayers the importance of correctly declaring income relating to Cryptocurrency transactions.
By collecting information from Australian Cryptocurrency exchanges (eg. CoinSpot, Swiftftx etc), the ATO has been data matching information provided by the exchanges against the income reported in your tax return.
The data collected may contain the following details:
Digital currency owner details
- Australian Business Number
- Date of birth
- Contact phone numbers (land line, mobile)
- Social media accounts (e.g. Facebook, Twitter, Telegram, Reddit, Whirlpool).
Account and transaction details
- Status of account (e.g. open, closed, suspended, lost)
- Linked bank accounts
- Wallet address associated with the account
- Lost or stolen crypto amounts linked to accounts
- Unique identifier (user ID)
- Transaction date & time
- Type of crypto
- Amount (in fiat and crypto)
- Type of transfer and description
- Total account balance.
The ATO has advised they will be writing to about 100,000 taxpayers with Cryptocurrency assets to alert them of their tax obligations, explaining their tax obligations and urging them to review their previously lodged returns.
Cryptocurrency Gains/Losses & Disposals
You must report a disposal of cryptocurrency for capital gains tax purposes if you either:
- exchange one cryptocurrency for another cryptocurrency
- trade, sell or gift cryptocurrency
- convert cryptocurrency to a fiat currency, for example to Australian dollars (AUD).
If you only transfer cryptocurrency from one wallet to another wallet while maintaining ownership of the coin, it is not considered a disposal of cryptocurrency for tax purposes. If your cryptocurrency holding reduces during this transfer to cover the network fee, the transaction fee is a disposal and has capital gain consequences.
Record Keeping Requirements
You need to keep records of all your transactions associated with acquiring, holding and disposing of cryptocurrency. Such documentation may include:
- Documents that display:
- the cryptocurrency & the purchase/sale price in AUD
- the date and time of the transaction
- commission or brokerage fees on the purchase & sale
- agent, accountant and legal costs
- exchange records
- Software costs related to managing your tax affairs
- Digital wallet records and keys
- Documents showing the date and quantity of cryptocurrency received via staking or airdrop
- Documents that display:
If you hold, trade and/or transfer Cryptocurrencies between multiple accounts and wallets, keeping track of your original purchase price can become complex very quickly.
We recommend the use of a Cryptocurrency portfolio tracking software. This software provides an easy solution to a complex problem and can provide the following benefits:
- Intuitive software which converts all transactions back to AUD making tracking the cost base very simple
- A snapshot of your Cryptocurrency portfolio in an easy-to-understand manner
- A summary of unrealised Cryptocurrency gains enabling you to make a more informed decision
- Ability to differentiate between airdrops, mining rewards, staking rewards, fork etc
- A portfolio valuation as at 30th June each year – very handy for those with a SMSF
Cryptocurrency Myths and F.A.Q
Cryptocurrency is a currency for tax purposes and is therefore not taxable – False.
Under the Currency Act, the unit of currency of Australia is the Australian Dollar and is the only recognised form of payment besides the currency of some other country.
If I only withdraw what I originally put into Cryptocurrency, I am not required to pay any tax – False.
The gain/loss is calculated based on a per unit basis and is therefore apportioned based on the cost/proceeds per unit.
Cryptocurrency is anonymous so the ATO won’t know if I buy or sell Cryptocurrencies – False.
The ATO collects Cryptocurrency information from Australian crypto designated service providers (DSPs) as part of a data matching program to ensure people trading in crypto are paying the right amount of tax.
I only need to report a gain/loss from Cryptocurrency when it is converted back into AUD – False.
If you convert from one currency to another, the gain/loss is reportable. For example, if you purchase Bitcoin with AUD and then convert a portion of Bitcoin to Ethereum, the gain/loss on the transfer from Bitcoin to Ethereum is reportable.
If I lose access to my Cryptocurrency or fall victim to a Cryptocurrency scam (eg. rug pull), I can claim this as a capital loss – True.
If you satisfy the criteria set out by the ATO, you are able to claim a loss on the Cryptocurrency.
Please contact our office on 07 3831 1055 if you would like some assistance in reviewing your Cryptocurrency tax position or book in a session with Henry Giang if you would like to run through setting up portfolio tracking software.