Cryptocurrency & Tax
Activities related to Crypto currencies & Tax
Cryptocurrency is a new class of digital asset, and it is considered to be a form monetary value able to be paid for the exchange of goods and services. The receiving of and trading of cryptocurrency is subject to taxation and must be declared yearly to the ATO (Australian Taxation Office). You can be subject to both income tax and capital gains tax depending on how and what activities you have been engaged with regarding cryptocurrency.
The ATO has published guidelines on cryptocurrency and the tax treatment of it in Australia. You can learn more by visiting their site and reading these – click here (Tax treatment of cryptocurrencies | Australian Taxation Office (ato.gov.au))
You need to know that that ATO can collect information from banks, cryptocurrency exchanges and other sources to help them identify persons that are actively involved with trading cryptocurrencies. The type of information collected will include your name, address, ABN, date of birth, contact information, and potentially any trading information recorded by a registered Digital Currency Exchange.
So, it is advised that if you are going to buy, sell, trade cryptocurrencies, NFTs (non-fungible tokens), and other digital assets that you keep in mind that you will need to declare your activities to the ATO. You may be potentially fined if you fail to do so.
Due to this, we recommend that at the conclusion of each use, you download the latest version of your account statement, for your own records. Please keep this statement dated at the time of download, in a folder on your computer, or a secure USB Storage Device.
Classification by the ATO
The Australian Tax Office treats the buying and selling of cryptocurrency the same way as buying and selling shares. When you sell your cryptocurrency or exchange it for another cryptocurrency a capital gains tax event occurs. If a profit is made on the selling or exchange, the gain maybe taxed. If you hold cryptocurrency for more than 12 months you may be entitled to the 50% capital gains tax discount. The rules vary depending on whether the cryptocurrency was bought or exchanged as an investor or whether it was used in the same way as Australian dollars, for personal use.
Cryptocurrency acquired for less than $10,000 are disregarded for capital gains tax if for personal use. Professional advice should be sought as different rules apply if you are trading in cryptocurrency as a business or as a professional trader. If you have a business for cryptocurrency trading profit may be considered as normal income. But you do have to meet tests to determine if you have a cryptocurrency business.
Understand if you are an investor, or a trader?
Examples to help you understand how to classify your activities:
At all times we strongly suggest that it is best to check with your Accountant or Tax Agent about reporting your activities.
At PIPezi we have further detailed information to assist anyone that is registered on our digital currency exchange to help them navigate their obligations and to work through and get an indication of their tax obligations in Australia or their country of residence.
We have also partnered with TaxConnect and other services to provide any businesses or traders using our platform with accounting and taxation reporting as well as additional support services.