Cryptocurrency is decentralised but it doesn’t mean it is tax free. It’s important that crypto activity is declared on a tax return as the Australian Tax Office (ATO) will be keeping a close eye on cryptocurrency activity.
The ATO estimate between 500,000-1,000,000 Australians own cryptocurrency and every time any transactions occur, the ATO receives information and checks that tax records are compliant.
An individual owning cryptocurrency is subject to capital gain tax on any profits at the time of sale. Crypto is exempt from the goods and services tax. Anytime cryptocurrency is disposed of, the ATO taxes based on profits or losses generated from disposal. If an investment is held for a period longer than 12 months, it may be entitled to the capital gains tax discount.
If cryptocurrency is for personal use, then it’s not taxed. For example, if it’s acquired and used within a short period of time, then it’s likely to be a personal use asset. The longer it is held, the less likely it is for personal use.
If cryptocurrency is stolen or you lose your seed password, a capital loss can be claimed as long as proper evidence is provided to the ATO.
It’s important to keep records of cryptocurrency transactions and for accountants to be aware if your clients are trading cryptocurrency.