Tax Tips for Cryptocurrencies

Posted 9 Jun '23

Tax Tips for Cryptocurrencies

In Australia, it is estimated that almost 1 in 4 adults has some type of cryptocurrency. Crypto has been particularly popular with millennials across the globe — more than one quarter of Australian investors aged 18 to 34 have at least 10 per cent of their portfolios invested in cryptocurrency.

With the popularity of this non-traditional currency on the rise, its important to understand that there are tax obligations associated with acquiring or disposing of cryptocurrency.

Crypto transactions are on the ATO radar. The ATO treat cryptocurrency like shares and many other investments, so it is generally regarded as a capital gains tax asset. However, there are different rules for using cryptocurrency in business and for personal expenses or investment.

You must keep records of all transactions, including dates, AUD value, the nature of the transactions, exchange receipts, legal costs and other parties involved (even a crypto address is enough) in the sale or purchase of cryptocurrency.

The ATO has a cryptocurrency data-matching program to allow them to identify and address multiple taxation risks:

  • Capital gains tax (CGT) – If you acquire cryptocurrency as an investment, you may have to pay tax on any capital gain you make on disposal of the cryptocurrency. Disposal occurs when:
    • selling cryptocurrency for fiat currency
    • exchanging one cryptocurrency for another
    • gifting cryptocurrency
    • trading cryptocurrency
    • using cryptocurrency to pay for goods or services
  • Omitted or incorrect reporting of income – In some situations cryptocurrency transactions can also give rise to ordinary income. Taxpayers who trade cryptocurrency or businesses that accept cryptocurrency as payment have obligations to report the income generated in their tax returns.
  • Fringe benefits tax (FBT) – When employees receive cryptocurrency as remuneration under a salary sacrifice arrangement, the payment of the cryptocurrency is a fringe benefit.

The ATO obtains data relating to cryptocurrency transactions and account information from designated service providers (DSPs). The data obtained will be used to identify the buyers and sellers of crypto-assets and quantify the related transactions.

The ATO will match the data provided by DSPs against ATO records to identify individuals who may not be meeting their registration, reporting, lodgement and/or payment obligations.

The data elements that the ATO will be collecting include client identification details and transaction details.

  • Client identification details (names, addresses, date of birth, phone numbers, social media account and email addresses)
  • Transaction details (bank account details, wallet addresses, transaction dates, transaction time, transaction type, deposits, withdrawals, transaction quantities and coin type)

Cryptocurrency is a rapidly evolving area. It’s important to stay up to date and understand any developments in tax consequences. More information on the ATO’s treatment of cryptocurrency can be found on their website.

The message here is simple: if you have cryptocurrency, you will need to declare it as part of your tax return as you would any other income or investment.

Please feel free to get in touch with your WDF  contact or phone 02 6921 5444 to talk with us about how we can help make tax time easier for you and ensure you are meeting your obligations around cryptocurrency.

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