Are you a routine cryptocurrency investor? If yes, then you are liable to pay crypto tax in Australia.
But how does the crypto tax in Australia function? What are the events on which you need to pay tax on crypto in Australia? Moreover, do you need to pay income tax or capital gain tax?
Before moving to taxation, let’s understand the basic definition of cryptocurrencies. Cryptos, such as Bitcoin, Ethereum, and Dogecoin, are digital assets that use encryption to secure transactions. Unlike other countries, they are considered legal and are taxed as property in Australia.
Cryptos are subject to income tax and capital gains tax (CGT) rules based on the nature of the transaction. Moreover, any crypto exchanges that want to operate in and from Australia need to register themselves with AUSTRAC under the category of financial service provider. So, if you are looking to gain more insight about crypto taxes in Australia, keep reading.
When To Report Crypto Taxes In Australia?
The Australian tax year spans from 1 July to 30 June of the following year. If you’re filing your tax return for the period from 1 July 2023 to 30 June 2024, the deadline is 31 October 2024. However, if you are filing through an accountant, you have until 15 May 2025 to submit your return.
Can ATO Track My Crypto Transactions?
The ATO can track your crypto transactions if you’re an Australian cryptocurrency investor. It has established a robust data-matching program with designated service providers (DSPs), such as Australian-based cryptocurrency exchanges. If you’ve signed up for a crypto account on any Australian exchange or wallet, the ATO most likely already has access to your personal and transaction data.
The ATO’s ability to track crypto transactions dates back as far as 2014. In May 2024, the ATO expanded its data collection efforts by requesting the personal and transaction details of 1.2 million Australian crypto investors. The purpose of this initiative is to ensure that individuals are meeting their tax obligations and accurately reporting their crypto transactions.
Here are some key data points the ATO can collect:
- Full name(s) registered on the account
- Date of birth
- Residential, postal, and other addresses
- Australian Business Number (if applicable)
- Email address and contact numbers
- Social media accounts
- Identity verification document details
- Registration IP Address
- User ID and account type
- Wallet addresses, transaction details, and linked bank accounts
With this comprehensive data, the ATO aims to monitor crypto-related tax compliance. If discrepancies are found, the ATO may send warning letters. Since 2020, hundreds of thousands of Australian crypto investors have received such notices, advising them of their tax obligations. Investors were given deadlines to report and amend their tax lodgements to avoid penalties.
To ensure compliance, it’s important to report your crypto gains and losses correctly. The ATO is likely to continue expanding its data collection efforts in the future, making it harder for crypto investors to evade tax reporting requirements.
Crypto Tax In Australia
The Australian government does not consider cryptocurrencies to be legal tender or foreign currency. Instead, cryptocurrency tax in Australia is based on the principle that crypto assets are treated as property for tax purposes.
These can be cryptocurrencies, NFTs, tokens, or stablecoins. The crypto taxation is overseen by the Australian Taxation Office (ATO).
ATO ensures taxpayers comply with tax obligations and report their crypto transactions accurately. The ATO has issued guidance on how to treat different types of crypto transactions:
- Buying and selling crypto on an exchange or peer-to-peer platform
- Swapping one crypto for another.
- Using crypto to pay for goods or services.
- Receiving crypto as income from mining, staking, airdrops, or interest.
- Participating in crypto chain splits or forks.
Depending on the nature and frequency of these transactions, the ATO may classify a taxpayer as either a crypto investor or a crypto trader.
Crypto investors who buy crypto to gain long-term gains are subject to CGT rules, which means they have to calculate their capital gain or loss for each disposal of crypto. On the other hand, crypto traders are considered to be carrying on a business of buying and selling crypto and have to report their income and expenses as ordinary income.
Let’s dive into this in the next section.
Crypto: Traders Vs. Investors
Although there are other complexities when talking about crypto taxation in Australia, the primary rule is that the tax treatment primarily depends on whether you are a crypto investor or a crypto trader since different rules apply to individual investors and daily traders.
Tax Treatment For Crypto Investors
Crypto investors buy and hold crypto long-term. They purchase and sell cryptocurrencies as a personal investment, similar to buying and selling stocks.
They aim to grow their wealth steadily by making a profit through long-term capital gains. You can classify yourself as a crypto investor if you:
- Construct your own portfolio,
- Mine cryptocurrency as a part of your hobby,
- Gain returns over a longer period of time, or
- Perform casual trading.
As per ATO, if you are an investor, you will be liable to CGT on your gains when you dispose of your invested crypto assets. However, you can avail yourself of a 50% CGT discount if you hold your crypto for over 12 months before disposing of it.
Tax Treatment For Crypto Traders
Crypto traders buy and sell crypto frequently or as part of a business activity. A trader shoulders business activities to earn income from selling and buying shares. You can identify as a crypto trader if you:
- Trade in cryptocurrency regularly.
- Ensure that you are trading strategically.
- Operating on a business level
- Mine crypto tokens as a business.
Your income as a crypto trader is taxed as ordinary income. Moreover, if you subsequently dispose of the cryptos by either selling, trading, or gifting them, you will have to pay CGT on the gain.
Note: As a crypto trader, you cannot claim the 50% CGT discount the investor enjoyed.
You must keep records of your income and expenses and report them in your business schedule or as a sole trader. If the expenses meet specific criteria (must be an Australian resident and carrying on a business of trading in crypto assets), the ATO sets, you may be eligible for deductions, such as the small business CGT concessions.
Whether you are a trader or an investor, you can make gains or losses on your transactions when trading in cryptocurrency. The next sections will discuss how capital gains and crypto income are taxed in Australia.
Capital Gains Tax In Australia
Before diving into the tax regulations of CGT in Australia, let’s first understand what CGT is.
CGT is a tax that applies to the profit or loss you make when you sell or dispose of a crypto asset. In Australia, crypto is considered property liable to CGT, meaning any transactions involving the disposal of such property may trigger a CGT event and affect your tax liability.
Disposal does not always mean the selling of crypto assets. Generally, disposal is an act where you transfer your crypto token ownership to someone else. Such events include
- Selling the crypto tokens in AUD,
- Gifting cryptocurrency to another person,
- Exchanging or swapping one crypto token for another, or
- Buying goods or services with a crypto asset.
Your eligibility for a 50% Capital Gains Tax (CGT) discount in Australia depends on the duration you’ve held the asset.
Hence, whether there is a profit or not, you must report the same when filing your income tax.
Crypto Income Tax In Australia
Income tax is imposed on the income of individuals or businesses. In Australia, there are several cases where crypto transactions are treated as ordinary income and are subjected to ordinary income tax.
If you are a crypto investor, you are not necessarily liable to pay income tax on every transaction, but you’ve to pay tax if you earn income from cryptos. Such scenarios include:
- Receiving your salary in cryptocurrencies
- Become a validator in a PoS or PoW network
- Selling NFTs you have created as an artist
- Loaned or staked cryptocurrency on interest.
Other than the scenarios quoted above, there are transactions in the Australian DeFi space that are also categorised under income tax. Such transactions include receiving cryptos through
- Referral token rewards system such as Binance referral
- Airdrops which exclude the initial offering
- Playing DeFi games such as Axie Infinity
- Browsing platforms such as Brave
- Campaigns based on learning to earn, such as Coinbase Learn.
If you are earning crypto using any of the above-mentioned cases, you will be subject to ordinary tax in Australia.
Income Tax Bracket In Australia
Here’s the tax bracket for the year 2024.
| Table Header | Table Header |
|---|---|
| Income Tax Bracket | Tax Rates |
| Up to AUD 18,200 | 0% |
| AUD 18,201 to AUD 45,000 | Nil + 19% of the amount crossing AUD 18,200 |
| AUD 45,001 to AUD 120,000 | AUD 5,092 + 32.5% of the amount crossing AUD 45,000 |
| AUD 120,001 to AUD 180,000 | AUD 29,467 + 37% of the amount crossing AUD 120,00 |
| Over AUD 180,000 | AUD 51,667 + 45% of the amount crossing AUD 180,000 |
Tax-Free Crypto Event In Australia
Even though most transactions involving crypto assets are subject to either CGT or income tax, depending on the nature and purpose of the transaction, there are several cases in which you do not have to pay any taxes in the country.
Buying And Holding Cryptocurrency
If you buy and hold crypto assets without disposing of them, you do not have to pay any tax. However, you must report any capital gains or losses when you sell or exchange them.
Mining Crypto As A Hobby
You are a hobby miner if you mine crypto for interest and not to earn large-scale profits. The motive is gathering the tokens rather than immediately selling them for profit. Hence, the tokens received through such mining activity are not categorised under taxation.
Transferring Cryptocurrency Between Wallets You Own
If you move your crypto assets from one wallet to another, as long as both wallets are under your control and ownership, this is not a taxable event. You are not changing the nature or right of your crypto assets.
Receiving A Cryptocurrency Gift
If someone gives you crypto assets as a gift, you do not have to pay tax on them at the time of receipt. However, you will have to pay CGT when you dispose of them, and the cost base will be the market value of the crypto assets at the time you receive them.
Donating Cryptocurrency To A DGR Organisation
You can claim a tax deduction for donations of crypto assets to Deductible Gift Recipients (DGRs). DGRs are charities and other non-profit organisations endorsed by the Australian Taxation Office (ATO) as eligible for tax-deductible donations.
However, it is essential to note here that some of the tax-free transactions are clear-cut, such as buying and holding cryptocurrencies; the distinction between tax-free and taxable transactions can become less clear, particularly in the context of DeFi transactions or transitioning from being classified as an ‘investor’ to a ‘trader.’
Tax On Crypto Mining
Crypto mining validates transactions on the blockchain and creates new blocks. As per the ATO, tax implications of crypto mining depend on whether the activity is classified as a hobby or a business.
Tax Implications On Mining As A Hobby
When you engage in crypto mining as a hobby, you do it because of your personal interest or as a way to pass the time. You invest modestly in mining equipment, often running a small-scale operation from home.
Your main goal is accumulating the cryptocurrencies you mine rather than selling them immediately for profit. In this situation, the cryptocurrencies you acquire are not treated as income. Instead, they are seen as capital acquisitions.
Hence, when you sell, trade or gift away your mined crypto token, you have to pay CGT on the profit you incurred through the same.
Tax Implications On Mining As A Business
However, when you run crypto mining as a significant business operation, it falls under commercial mining. In such cases, tax regulations adhere to the trading stock rules.
This implies that all earnings generated from mining activities, regardless of whether they stem from a mining pool or a personal mining rig, are deemed income and should be incorporated into your taxable income. Additionally, you are liable to pay CGT when you dispose of the mined tokens at a profit.
When mining as a business, the only advantage you enjoy in tax treatment is the opportunity to claim deductions for expenses associated with your mining activity, such as electricity, hardware, and software costs. Such deductions can lower your net taxable income, diminishing your tax liability.
How To Calculate Tax On Crypto Mining?
To calculate the tax implication on crypto mining, you must follow the steps:
- Determine The Type Of Mining Activity: Your primary goal is to determine whether you are mining crypto tokens as a hobby or a business.
- Determine The Fair Market Value Of The Token: The second step is to calculate the FMV of the token at the time when it was mined. This will serve as a cost basis to compute CGT.
- Determine The Expenses: You now need to determine all the expenses which you have incurred to mine that crypto token, such as the cost of electricity, the cost of hardware and software, mining pool fees, etc.
- Compute The Net Taxable Income: To compute the net taxable income, you need to apply the following formula:
Taxable Income = FMV of the Token – Mining Expenses
If you are a hobby miner, you will not have to pay any tax on your mined crypto but will be subjected to CGT when disposing of it. You can use the CGT formula above to calculate the capital gain you earned on your transaction.
Example:
Harry and Barry are two brothers who are involved in crypto mining. Harry mines 1 Bitcoin worth AUD 500 as a personal interest from his home setup. Hence, the value of the token he receives from mining does not incur any immediate tax implications.
On the other hand, Barry owns a crypto rig and mines crypto as a business. He mines Bitcoin worth AUD 50,000 in a financial year. This amount he generates from mining the tokens is considered income, and he is liable to pay ordinary tax.
However, he has spent AUD 5,000 on electricity costs for running the rig and AUD 10,000 on setting up the mining rig. Hence, his net taxable income becomes AUD 35,000 (50,000 – 15,000). He will have to pay tax on this amount based on the income tax rate given above.
If Harry and Barry decide to dispose of their tokens, they will have to pay CGT.
Tax On Gifting Or Receiving Crypto
If you think of giving crypto assets as a gift in Australia, you should know the tax implications.
Giving Crypto As A Gift
According to the ATO, gifting crypto assets is a capital gains tax (CGT) event, similar to any other disposal of an asset.
In simple terms, you need to know the value of your crypto assets when you gift them to determine whether you make a capital gain or loss on the transaction. You must also keep records of the date, number, type and market value of the crypto assets you gift or receive.
Receiving Crypto As A Gift
On the contrary, there are no CGT implications if you receive crypto assets as a gift. However, a CGT event may happen if you dispose of or transact with the crypto assets later. You will need to use the market value of the crypto assets on the day you received them as your cost base when calculating your capital gain or loss.
How To Calculate Tax On Crypto Gifts?
To calculate tax on your crypto gift, you need to do the following:
- Determine The Cost Basis Of The Token: The cost basis is the FMV of the token at the time of purchase, mining or staking.
- Compute The FMV At The Time Of Gifting: You need to determine the FMV of the token at the time of gifting. This will also serve as the cost basis of the receiver. For a receiver, your FMV will be the money you receive when you dispose of the gifted crypto.
- Calculate Capital Gain: You need to subtract the cost basis from the FMV of the token at the time of gifting (if giver) or disposal (if receiver), thereby calculating the capital gain or loss.
Example:
Sam purchased an ETH token for AUD 3,000. After a month, he gifted the token to Ellesa when the FMV of ETH was AUD 5,000. Sam made a gain of AUD 2,000 from the transaction. However, since the gain is not crossing the tax bracket, he is not liable to pay CGT.
Alternatively, Ellesa, when receiving the crypto, does not have to pay any tax. However, when she decides to sell the ETH token after 10 months when the FMV was AUD 25,000, she’ll be making a profit of AUD 20,000 and liable to pay tax.
But, hold on. She doesn’t have to pay tax on the entire profit amount. She won’t have to pay taxes until she gains AUD 18,200. It allows her to subtract it from the net profit (20,000 – 18,200) = AUD 1800. She will be liable for a 19% CGT on this AUD 1800, resulting in a CGT tax liability of AUD 342.
Tax On Crypto Donations
When you donate crypto assets, it is treated as a CGT event, similar to any other asset disposal. Hence, it is important to note the crypto asset’s value at the time of donation. This will help you to calculate the capital gain or loss you may have made on the transaction.
However, if you have made a gain by donating crypto to the DGR, you will be liable to claim a deduction, and the gain will not be subjected to CGT. In general, you are subjected to deductions on your capital gains when you donate crypto assets to DGRs under the following circumstances:
- If the gift is made under a will (testamentary gift), you cannot claim a tax deduction for it.
- When you donate to the Cultural Gifts Program.
- If the crypto assets being donated are classified as personal use crypto assets.
How To Calculate Tax On Crypto Donations?
To calculate tax on your crypto gift, you need to do the following:
- Compute The Cost Basis Of The Token: The cost basis of the token is the Fair Market Value (FMV) at the time of its acquisition, which could be when you purchased it, mined it, or received it through staking.
- Compute The FMV At The Time Of Donating: You need to note the FMV of the token at the time you are donating.
- Calculate Capital Gain: You need to subtract the cost basis from the FMV of the token at the time of donation, thereby calculating the capital gain or loss.
Example:
Suppose Adam bought 1 Bitcoin (BTC) for AUD 10,000 on 1 July 2022. On 3rd May 2023, he donated his BTC to a school (not registered under DGR) when it was worth AUD 30,000. He also paid a transaction fee of AUD 100 to complete the transaction.
He must subtract his cost base from the capital proceeds to work out his CGT.
Cost base = AUD 10,000 + AUD 100 = AUD 10,100
Capital proceeds = AUD 30,000
Capital gain = AUD 30,000 – AUD 10,100 = AUD 19,900
Now, as per the given income tax slab, he is not liable to pay any taxes till AUD 18,200. Therefore, he can subtract the amount from his capital gain (19,900 – 18,200) = AUD 1700.
He needs to pay 19% CGT on this AUD 1700, i.e., AUD 323.
Tax On Crypto Airdrops
An airdrop is a distribution of crypto tokens or coins to a group of people, usually for free or in exchange for some action. Airdrops are often used as a marketing strategy to promote new projects or increase the popularity of existing ones.
In Australia, the tax treatment of airdrops depends on whether or not the tokens or coins are established. Established tokens or coins have been traded on a crypto exchange before the airdrop, while non-established tokens or coins have not.
Tax Liability On Established Coins
According to the ATO, if you receive an airdrop of an established token or coin, you must include the market value of the crypto received in your ordinary income when you receive it.
This means you will pay income tax on the airdrop at your marginal tax rate. You need to keep records of the date and time of the airdrop, the number and type of tokens or coins received, and their market value in Australian dollars.
Tax Liability On Initial Allocation Coins
If you receive an airdrop of a non-established token or coin, you will not have to pay income tax, nor will it trigger a CGT event. However, you will still need to keep records of the airdrop for future reference. In such cases, your cost basis for these tokens is either the amount you paid for them or zero if you obtained them at no cost.
In both cases, if you later sell, trade, or dispose of the crypto received from any of the above reasons, you will be subjected to pay CGT on the profit.
How To Calculate Tax On Airdrops?
To calculate tax on your crypto airdrops, you need to do the following:
- Establish The Type Of Coin You Received: You need to ensure the type of token you receive as an airdrop, i.e., whether it is an established coin or an initial allocation coin.
- Calculate The Cost Basis Of The Coin: Once you know the type, you now need to learn the cost basis of the coin. It is the FMV of the token at the time of receipt. If it is an established coin, it will be the FMV, and if it is a non-established token, the cost basis will either be zero or the amount you paid to receive the coin.
- Compute The Cost Proceeds Of The Token: It is the FMV of the token at the time of disposal.
- Determine The Capital Gain: You now need to determine the capital gain or loss on the transaction. You can subtract the cost basis from the cost proceeds to know the value of the gain.
Example:
Alice received 100 UNI tokens from an airdrop on 17 September 2020. UNI is an established token that was traded on Uniswap before the airdrop.
On that date, UNI had a market value of AUD 5 per token, so Alice had to include AUD 500 ($5 x 100) in her ordinary income for the 2020-21 financial year. She also recorded the date, time, number, and value of the UNI tokens she received.
On 15 March 2021, Alice sold her all her UNI tokens for AUD 3,000 ($30 x 100).
She had to calculate her capital gain or loss from this transaction.
Her capital gain was AUD 2,500 ($3,000 – $500), which she had to report in her income tax return for the 2020-21 financial year.
Tax On Crypto Staking
Crypto staking is a process of locking up your crypto assets in a network to validate transactions and earn rewards.
Receiving Staking Rewards
According to the ATO, staking rewards are considered ordinary income when received. Hence, you must report the value of the staked tokens in Australian dollars as part of your assessable income in your tax return. You can determine the same by adding up the total FMV of the tokens staked.
Selling Staking Rewards
Moreover, if you later sell, trade, or exchange the staked tokens, you may incur a capital gain or loss, depending on the change in their value since you received them, making you liable to pay CGT.
How To Calculate Tax On Crypto Staking?
To calculate your tax liability on crypto staking, you need to follow these steps:
- Identify all your staking transactions during the financial year, including the dates, amounts, and types of tokens involved.
- Convert the value of the tokens to Australian dollars using a reliable source, such as a reputable exchange or an online calculator.
- Add the value of all your staking rewards and include it in your assessable income for the year.
- If you dispose of any staked tokens during the year, calculate your capital gain or loss by subtracting the cost base from the proceeds. The cost base is the market value of the tokens at the time you received them as staking rewards.
Example:
Jenny stakes 10,000 Avalanche tokens on 1 July 2022 and receives 100 Avalanche tokens as a reward on 31 December 2022. On that date, Avalanche is worth $1 per token. On 1 May 2023, she sold all her 10,100 Avalanche tokens for $1.50 per token.
Jenny’s tax liability on crypto staking is as follows:
She has to include AUD 100 (100 x $1) as ordinary income in her tax return for the 2022-23 financial year. She has a capital gain of AUD 500 (10,100 x $1.50 – 10,100 x $1) from selling her Avalanche tokens, for which she has to pay tax on her net capital gain at her marginal tax rate.
Tax On NFT
Non-fungible tokens (NFTs) are crypto assets that represent ownership of unique digital items, such as art, music, games, or memes. NFTs are taxed in Australia according to the same general principles as cryptocurrencies, but the tax treatment may vary depending on the circumstances and the use of the NFTs.
According to the ATO, you may pay income tax on the NFT:
-As a CGT asset under the capital gains tax (CGT) regime
– As a profit-making scheme
– On revenue account as trading stock
– As part of a business
If you create and sell NFTs as part of your business, you need to report the income from the sales and any commissions or royalties you receive from subsequent transfers of the NFTs. You can also deduct the expenses of creating and selling the NFTs, such as gas, minting, and platform fees.
If you buy and sell NFTs as an investor, you must calculate your capital gain or loss from each transaction. You can also include any transaction fees in the cost base or reduce them from the sale proceeds.
To illustrate how NFTs are taxed in Australia, let’s look at real-life examples:
Example 1: NFT As A Part Of Business
Shelley is a professional musician who creates and sells NFTs of her songs on a platform that pays her royalties for every subsequent sale of her NFTs. In June 2023, she sold an NFT for 5 ETH worth AUD 20,000.
In December 2023, she received 0.5 ETH as a royalty for a secondary NFT sale worth AUD 2,000. Shelley must report AUD 22,000 as business income for the 2023-24 financial year and pay income tax according to her marginal tax rate.
She can also claim deductions for the expenses related to creating and selling the NFTs, such as gas fees, minting costs, and platform fees.
Example 2: NFT As A Part Of Investment
Matthew is an avid digital art collector who buys and sells NFTs as a hobby. In July 2023, he bought an NFT for 3 ETH, worth AUD 12,000. In November 2023, he sold the same NFT for 4 ETH, worth AUD 16,000.
Matthew has made a capital gain of AUD 4,000 from this transaction and needs to report it in his 2023-24 tax return.
He can also reduce his capital gain by including any transaction fees he paid in the cost base or deducting them from the sale proceeds.
DeFi Crypto Tax
The ATO has finally provided guidance on the tax treatment of DeFi transactions for Australian investors. DeFi transactions can trigger either Capital Gains Tax (CGT) events or assessable income, depending on the activity involved.
Earning Interest from DeFi Protocols
If you earn interest in the form of new tokens or coins through DeFi, this is considered income, and you must pay Income Tax.
Staking, Yield Farming, and Liquidity
Earnings from staking or yield farming in DeFi typically attract Income Tax if you receive new tokens. The accrued value of tokens results in CGT.
Selling or Swapping Tokens on DeFi protocols
Whenever you sell or swap a coin or token on a DeFi protocol, it is considered a disposal for tax purposes. This means any profit from the disposal is subject to Capital Gains Tax.
Spending Crypto
The ATO has specified clear rules on when spending crypto is taxable and when it is tax-free.
Spending Crypto That Is Not a Personal Use Asset
In Australia, spending cryptocurrency is generally considered disposal, and this action often triggers Capital Gains Tax. The ATO outlines that if you use crypto for purchases or other transactions, it is treated as selling the asset. This means any profits or gains made from this transaction are taxable.
However, this applies only when the cryptocurrency is not classified as a “personal use asset.” Most crypto transactions for investment or business purposes fall under this category and are subject to tax.
Spending Crypto as a Personal Use Asset
If your cryptocurrency is classified as a personal use asset, the ATO allows an exception. A personal use asset is defined as crypto that is primarily bought and used for personal purposes, such as purchasing goods or services in small, non-investment-related transactions.
If your crypto meets this definition, you may be able to spend it without incurring any Capital Gains Tax. However, the scope of this exemption is limited, and the ATO has specific rules on what qualifies as personal use.
Spending Crypto with Gift or Debit Cards
The ATO has recently provided more clarity regarding spending crypto with gift or debit cards. According to their guidelines, when you use crypto to buy or load a gift or debit card, it is considered the disposal of your crypto.
As a result, this transaction is treated as a sale, meaning any gains you make from the value difference of your crypto at the time of purchase are subject to Capital Gains Tax. Therefore, using crypto to fund these cards does not provide a tax-free benefit and will be taxed like any other crypto transaction.
Gambling and Crypto Winnings
The ATO has provided guidance stating that cryptocurrency prizes and winnings from lotteries, game shows, and similar sources are not treated as ordinary income and are therefore tax-free.
However, you should maintain records of the fair market value of any crypto winnings. This is important if you decide to sell, swap, spend, or gift the cryptocurrency in the future, as any profit from these actions will still be subject to Capital Gains Tax.
Crypto Futures Trading, Margin, and CFDs
Taxes on crypto trading, including margin trading, futures, and CFDs, can be quite complex. Let’s break down how these taxes apply to different types of crypto trades.
Futures, Derivatives and Margin Trading
When dealing with cryptocurrency, understanding the tax implications of futures, derivatives, and margin trading is crucial. These three involve different strategies, so the rules vary for each. For margin trading, you borrow funds from an exchange to make trades, and there’s usually an interest payment involved. Although the ATO hasn’t issued clear guidelines specifically for margin trading, it’s wise to seek professional advice.
- Margin Trading: Involves borrowing funds to trade, typically on spot markets.
- Futures Trading: Speculates on the future price movement of a coin, with no borrowing involved.
- Derivatives: Include various financial instruments based on the price movement of assets, such as options and swaps.
As taxation can differ based on how each type of trade is treated, it’s important to consult a tax expert for accurate advice. Each exchange may have different platforms for these trades, so it’s crucial to understand their structure and tax implications.
Contracts for Difference (CFDs)
Contracts for Difference (CFDs) are a unique and complex financial tool, and so is their taxation. In Australia, the ATO treats most CFD profits as subject to Income Tax.
This applies when the CFDs are part of a business transaction, such as when an individual regularly trades for profit. The ATO views most CFD traders as experienced investors, so these profits are usually not eligible for CGT exemptions.
Here’s a breakdown of how CFDs are taxed:
- Income Tax: Most CFD profits are taxed under Income Tax as part of regular business activities.
- Losses: Any losses from CFDs can be claimed as tax deductions.
- Non-taxable profits: In rare cases, profits from CFDs may be non-taxable, but this applies mostly when a CFD is used for recreational purposes, like gambling, and is difficult to qualify under the ATO’s criteria.
Make sure you understand how your trading activity is classified by the ATO to ensure proper tax treatment of your CFD transactions.
Buying and Selling Cryptos As A Business
When buying and selling cryptocurrency as a business, the tax implications differ from personal trading. Businesses that trade crypto or hold it for sale must follow the trading stock rules rather than capital gains tax (CGT) rules. This means that any cryptocurrency acquired for business purposes is considered trading stock. At the end of the financial year, businesses must account for the tax value of this stock.
Profits from selling cryptocurrency that is held as trading stock are treated as ordinary income. This income is subject to standard business tax rates. Additionally, businesses can deduct the cost of acquiring cryptocurrency as a business tax deduction.
Businesses engaged in cryptocurrency trading, mining, or operating exchanges, including ATMs, must adhere to these rules. Such businesses need to maintain accurate records and seek professional advice to ensure compliance with tax obligations.
Crypto SMSFs
When cryptocurrencies are sold by a Self-Managed Super Fund (SMSF) that complies with relevant laws and regulations, any capital gains are taxed at a reduced rate of 15%.
How To Calculate Crypto Tax In Australia?
ATO makes you liable to pay crypto taxes as ordinary tax or CGT upon most crypto transactions; it is essential to learn how these taxes are calculated.
How To Calculate Income Tax in Australia?
To calculate your income tax on crypto, you need to keep track of all your transactions and determine the cost base of all the cryptos you have received as an income. Your net taxable income is the sum of all the FMV of the token you have received through mining, staking, airdrops or interests.
How To Calculate Crypto Gain?
To calculate capital gain on your crypto transactions, you need to follow these steps:
- Determine The Cost Base Of Your Crypto Asset: This is the amount of money or the market value of the property you gave to acquire your crypto asset. It also includes any platform or gas fees paid while acquiring the asset.
- Determine The Capital Proceeds Of The Crypto Asset: This is the amount of money or the market value you received in exchange for disposing of your crypto asset.
- Calculate The Capital Gain/ Loss: Subtract the Cost Base of the coin from the Capital proceeds.
Capital gain/loss = Capital Proceeds – Cost basis
If the difference’s value results are positive, you have gained a profit; if it is negative, you have incurred a loss.
However, the manual calculation of CGT and ordinary tax for each crypto transaction can be daunting. Hence, you can use crypto tax reporting software such as KoinX to simplify the process of crypto tax reports.
The platform offers you an accurate preview of all your crypto holdings. It auto-classifies crypto transactions so that you can have reliable tax reports, which can then be used to file taxes.
How To Pay Less Tax On Crypto In Australia Legally?
If you are a crypto investor in Australia, you might wonder how to legally pay less tax on your crypto gains. Here are some strategies you can consider:
Offsetting Capital Gain With Capital Loss:
If you have sold some of your crypto at a profit, you must pay capital gains tax (CGT) on the difference between the sale price and the cost base. However, if some of your crypto were sold at a loss, you can use that to reduce your taxable gain.
It is called offsetting capital gain with capital loss. To do this, you need to keep track of all your crypto transactions and calculate your net capital gain or loss for the financial year.
Holding Crypto For A Year:
Another way to reduce your CGT liability is to hold your crypto for at least a year before disposing of it. If you hold an asset for over 12 months, you are eligible for a 50% discount on your CGT. For example, if you bought 1 BTC for $10,000 and sold it for $20,000 after 13 months, your taxable gain would be $5,000 instead of $10,000.
Donating Crypto:
If you feel generous and want to support a good cause, you can also donate your crypto to a DGR-registered charity and claim a tax deduction for the market value of your donation. It can lower your taxable income and reduce your overall tax bill.
Calculating Profits At A Low-Income Year:
You can also plan and time your crypto sales to coincide with a low-income year. This is because the amount of CGT you pay depends on your marginal tax rate, which is determined by your total taxable income.
If you have a lower income in a certain year, you will pay less tax on your crypto gains than a higher income in another year. Therefore, you can sell your crypto when you expect a lower income, such as when you are retired, unemployed, or taking a career break.
Claiming Deductions As A Crypto Business Trader:
Suppose you are carrying on a business of buying and selling crypto assets. In that case, you may claim deductions for your expenses, such as trading fees, hardware, software, internet, electricity, etc.
However, it would help if you met specific criteria to qualify as a crypto business trader, such as having a business plan, keeping records, trading regularly and with a profit motive, and having a high turnover of crypto transactions. You must also report your income and expenses on a business schedule in your tax return.
How To Report Crypto Tax In Australia?
Crypto assets are treated as property, not currency, by the ATO. You must pay capital gains tax (CGT) on any profits from selling crypto assets. So, to report crypto taxes in Australia, you need to keep track of all your crypto transactions and calculate your capital gains or losses for each one.
Moreover, the ATO wants you to keep records of all your crypto transactions for at least five years. These records should include:
-The date of the transactions
– The value of the crypto assets in Australian dollars at the time of the transactions
– The purpose and nature of the transactions
– The details of the other parties involved, such as agents, accountants, and legal costs, including their names and addresses
– The receipts or invoices for any expenses or fees related to the transactions
The Australian tax year runs from July 1 to June 30 the following year. So, if you are filing your income tax return, the deadline is 31 October each year
KoinX In Action
KoinX is a powerful tool that can help you with crypto tax calculation and reporting in Australia. Whether you are a casual trader, a professional investor, or a business owner, KoinX can simplify your crypto accounting and tax compliance.
It lets you connect 180+ crypto wallets and exchanges, automatically importing your transactions and balances. It lets you preview all your exchanges in one place, so you can easily see your portfolio balance, performance, and tax liability at a glance.
You can also manually add or edit transactions or upload CSV files. The platform supports over 17,000 cryptocurrencies and tokens and uses live market data to calculate your portfolio value and profit/loss.
KoinX auto-classifies all your transactions based on the type of activity from which the said crypto token was received. This aids in generating accurate tax reports based on the nature of your crypto transaction. You can also export your tax reports in PDF or CSV formats and submit them online or offline to the tax accountants for tax filing.
Conclusion
Crypto tax in Australia is not as complicated as it may seem. You just need to keep track of your transactions, classify them as income or capital gains, and report them accordingly.
However, you can use KoinX, a crypto tax software that automates the process to save time and hassle. With it, you can focus on your crypto investments and leave the tax worries behind. Try KoinX today and see how easy crypto tax can be.
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Frequently Asked Questions
How much tax do I pay on cryptocurrency?
The amount of tax you pay on cryptocurrency depends on your circumstances and the type of crypto transactions you make.
Do I need to pay tax on crypto that I hold as a personal use asset?
You may not need to pay tax on crypto that you hold as a personal use asset. However, the rules around personal use assets are complex, so seeking professional advice from platforms like KoinX is important.
Do I need to pay tax on crypto that I lose or have stolen?
You may be able to claim a capital loss for crypto that you’ve lost or was stolen from you. This capital loss can be used to offset any capital gain for that financial year.
How is forking crypto taxed in Australia?
Forking crypto is a taxable event in Australia. If you fork crypto, you will be liable to pay capital gains tax on the value of the forked crypto at the time of the disposal.
What is the difference between capital gains tax and ordinary income tax?
Capital gains tax is applied to profits from selling or trading assets, such as cryptocurrencies. Ordinary income tax is applied to all other forms of income, such as wages, salaries, and business income.
