TAX TREATMENT OF CRYPTOCURRENCY.
Cryptocurrency is treated as an asset like shares, properties, ETFs etc and attracts Capital Gains Tax and Income Tax. Our cryptocurrency tax accountant can help you with crypto tax advice, prepare and lodge your cryptocurrency taxes.
With the ATO’s Crypto crackdown in place as the taxman locked in a data-matching system, it’s important that you know the tax obligations of your crypto trading.
HOW WILL THE ATO KNOW ABOUT YOUR CRYPTOCURRENCY DATA?
The ATO collects data on cryptocurrency transactions and account information with cryptocurrency Designated Service Provider (‘DSPs’) such as coinbase, coinjar, swyftx etc. Wonder how? it is because:
Data Matching Program.
The ATO has a Data-Matching Program with all Wallets, Exchanges and Brokers.
Knows Details of your Buy & Sell.
The ATO knows who and how much cryptocurrency they acquired &/or Sold as far back as 2014.
Knows your Wallet Information.
The ATO Knows Your Customer (KYC) Information when you sign up with any Wallets / Exchanges.
HOW DOES CRYPTOCURRENCY GET TAXED?
i. Whether you held crypto as an:
Investor
An investor is someone who buys cryptocurrencies in a company to grow their investment over time. In a nutshell, someone who hold assets for longer than 12 months. Investors can access the 50% Capital Gains Discount.
Trader
A trader is someone who buys and sells cryptocurrencies quickly to try and profit from price changes. E.g., for someone who holds assets for less than 12 months, any profit a trader make is taxed at your legal structure's marginal tax rates and doesn't have access to the 50% Capital Gains Discount.
Miner
If you are mining cryptocurrency, any profit you make should be converted into AUD and included in your assessable income. This is on the basis that the ATO considers you to be carrying on a business.
Business Owner
If you accept cryptocurrencies as payment for goods or services provided as part of your business, you will need to convert and record:
- crypto sales income in AUD at fair market value (assessable income).
- business expenses in AUD at fair market value. Business expenses are tax-deductible provided that it was acquired at arm's length value.
Also, capital gains tax events may arise if you sell your business' cryptocurrencies; however, the capital gain is to be reduced by the AUD value originally recorded as assessable income, therefore, you'll not be taxed twice.
Personal Use Asset
A personal use asset (such as a car, boat or painting) is exempt from CGT if it costs less than $10,000. The ATO will accept that cryptocurrency is a personal use asset if you can demonstrate that you acquired it purely to hold and then exchange for other goods and services, and not with the ‘intention’ of making a profit or in the course of carrying on a business, although the question of ‘intention’ can be quite subjective and is not always so easy to prove.
ii. Whether you made a Profit or Loss.
Profit
- Investors who held for 12 months or more can access the 50% Capital Gains Discount. Companies are not qualified for a 50% CGT Discount.
- Traders who held for less than 12 months are required to declare as assessable income and are taxed in accordance to the legal structure (see diagram iii).
Loss
- Capital Loss: Investors who held cryptocurrency for 12 months or more can offset capital losses against other capital gains in the same income year or carry forward to offset against future years capital gains – it cannot be offset against income of a revenue nature.
- Tax Loss: Traders who held cryptocurrency for less than 12 months can offset losses against other profits in the same income year or carried forward to offset against future profits – it cannot be offset against income of a revenue nature like salary / wages.
iii. Taxation of cryptocurrency based on your 'Legal Structure':
| Legal Structure | INVESTOR | TRADER | TAX RATES |
|---|---|---|---|
| Individual | 50% Discount | - | Individual Pay at Marginal Tax Rate |
| Sole Trader | 50% Discount | - | Sole Traders Pay at Marginal Tax Rate |
| Trust | 50% Discount - In the hands of beneficiaries ONLY | - | Beneficiary(s) Pay at Marginal Tax Rate |
| Partnership | 50% Discount - In the hands of partner(s) ONLY | - | Partner(s) Pay at Marginal Tax Rate |
| Company: Turnover <$10m | Not Qualified for 50% Discount | - | Flat at 27.50% on Taxable Income |
| Company: Turnover >$10m | Not Qualified for 50% Discount | - | Flat at 30.00% on Taxable Income |
ARE CRYPTO DONATIONS TAX DEDUCTIBLE?
Donating cryptocurrency to Registered Charity Organisations and Deductible Gifts Recipients is a tax-free event and is tax deductible. To calculate your deduction, you need to perform a capital gain or loss calculation based on $AUD price on Purchase and Donation date. However, your tax deduction will be equal to the fair market value of the donated cryptocurrency on Donation Date.
LODGEMENT DEADLINE 31 OCTOBER 2023