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ATO cryptocurrency tax prep

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ATO Cryptocurrency Tax Prep 2022

Last updated: Wednesday, 27 April 2022

The end of the financial year is nigh and the ATO have made one thing clear - if you’ve sold, traded or earned cryptocurrency during the 2021 - 2022 financial year, they want to know about it. Preparing for your ATO cryptocurrency taxes lets you make sure you’ve got everything in order for the 31st of October 2022 tax deadline - and as an added bonus, might even lower your tax bill! We’re covering everything you need to know about ATO cryptocurrency tax rules, ATO crypto capital gains and income, ATO crypto tax deadlines, ATO crypto tax evasion, the records you’ll need, how to report and file, as well as how Koinly can help.

How to prep for ATO cryptocurrency taxes

ATO crypto taxes are pretty simple if you’ve got the tools and the information you need - so there’s no need to worry about an unwelcome crypto tax audit. Follow these six simple steps to make sure you’re prepared for the end of the financial year and the tax deadline:

  1. Know the ATO cryptocurrency tax rules.
  2. Know the key ATO crypto tax deadlines.
  3. Optimise your crypto portfolio before the EOFY.
  4. Know how to calculate your crypto taxes.
  5. Know how to file your crypto taxes. 
  6. Keep good records of your crypto.

ATO cryptocurrency tax prep

Let’s dive in.

ATO cryptocurrency rules

The ATO has clear guidance on how they view cryptocurrency and how it’s taxed. You can learn all about this in our ultimate Australia crypto tax guide, but in brief - crypto is either subject to Capital Gains Tax or Income Tax.

ATO crypto capital gains

You’ll pay Capital Gains Tax on any profit you make as a result of:

  • Selling crypto for AUD (or any other fiat currency).
  • Trading crypto for another cryptocurrency - including buying NFTs with crypto.
  • Spending crypto on goods and services - unless the Personal Use Asset rule applies.
  • Gifting crypto to friends, family or even a total stranger.

ATO Capital Gains Tax

The amount of tax you’ll pay on crypto capital gains depends on your income and how long you’ve held your crypto for.

The ATO doesn’t have a specific Capital Gains Tax rate, instead it’s all based on the marginal Income Tax rates.

For short-term capital gains (from crypto you’ve held less than a year), you’ll pay tax at the same marginal Income Tax rate you fall into based on your total annual income.

For long-term capital gains (from crypto you’ve held more than a year), you’ll receive a 50% discount. So you’ll pay tax at your marginal Income Tax rate, but only on half of any long-term capital gains.

ATO crypto income

Meanwhile, you’ll pay Income Tax for a variety of other crypto transactions. In general, this will be when you receive new coins or tokens, including:

  • Airdrops of crypto.
  • Staking rewards.
  • Mining as a trader.
  • Referral bonuses.
  • Earning new tokens through DeFi protocols.

ATO Crypto Income Tax

You’ll pay Income Tax on the fair market value in AUD of any tokens on the day you receive them.

Now you know how crypto is taxed, you need to know the tax deadlines that matter.

ATO crypto tax deadlines

The ATO expects you to report your cryptocurrency as part of your annual tax return. You need to report your net capital gain or loss for the 2021 - 2022 financial year, as well as any crypto income from that financial year.

In other words, you need to report any profit (or loss) and any income from crypto you made between the 1st of July 2021 to the 30th of June 2022. You have until the 31st of October 2022 to file your annual tax return.

ATO crypto tax deadline

So, why does the end of the financial year matter so much if you’ve got until October to file? 

Because you only have until the end of the financial year to optimise your tax position and reduce your tax liability.

Optimise your crypto taxes before the EOFY

You can't outright avoid ATO cryptocurrency taxes - but you can utilise many strategies to reduce your overall tax bill, such as:

  • Offset your losses: Got losses from your crypto investments? You can offset these against capital gains to reduce your net capital gain and the amount you'll need to pay tax on. Better still, you can strategically offset these against your short-term gains before your long-term gains to ensure you pay the least amount of tax possible.
  • Harvest your losses: Got a shitcoin that's only ever losing value? Sell or trade and realise your capital loss so you can offset it against your gains. But beware the wash sale rule.
  • Utilise the Personal Use Asset: The Personal Use Asset is tricky, but if you're spending crypto - make sure you're buying crypto for the sole purpose of spending it. You may then potentially be able to buy and spend up to $10,000 tax free.
  • Invest in a Bitcoin ETF: The first Australian Bitcoin ETF launched this year, which lets investors gain exposure to Bitcoin, without the technical aspects of self-custody. ETF investors gain tax advantages in the form of franking credits and franked dividends.
  • HODL: Get a 50% discount on Capital Gains Tax for any crypto you've held for more than a year.
  • Pick the best cost basis method: The ATO allows investors to pick from a few different cost basis methods (including FIFO, HIFO and LIFO). These make a huge difference to your tax bill - learn more.
  • Donate to a worthy cause: You can claim an Income Tax deduction for donations to deductible gift recipients (DGRs).

Optimise and pay less crypto tax

Remember, if you’re going to optimise your tax position, you need to implement most of these strategies before the 30th of June 2022.

Once you’ve optimised your position, you need to know how to calculate your tax liability.

Calculate your ATO crypto taxes

The last thing you need is to leave your crypto tax prep until October and be stuck with a huge surprise tax bill, so calculating your crypto taxes correctly and knowing what you owe is vital.

There’s a couple of ways you can calculate your crypto taxes: yourself, or with the help of crypto tax software. Let’s look at both.

Got the calculator out and ready to do it yourself? Here’s how:

  1. Identify each taxable crypto transaction between the 1st of July 2021 and the 30th of June 2022.
  2. Identify the type of tax that applies to each transaction - whether that’s Income Tax or Capital Gains Tax.
  3. For transactions subject to Capital Gain Tax, you’ll need to identify your cost basis for each asset. This is what it cost you to acquire the asset, plus any purchase or sale fees. You’ll then need to subtract your cost basis from the sale price (or fair market value if otherwise disposed of) to determine your capital gain or loss. You’ll also need to separate your short-term and long-term capital gains and losses. You can then calculate your net capital gain by calculating your total capital gain, less any losses (from any losses carried forward too), less any discount from long-term capital gains.
  4. For transactions subject to Income Tax, you’ll need to identify the fair market value of any coins in AUD on the day you received them. You can use historical data from a price aggregator to do this. You’ll need to add up all crypto income to give you a total additional income figure.

Suffice to say, if you’re an active investor - this is a lot of work. So we recommend option two - use a crypto tax calculator to do it all for you. Here’s how it works:

  1. Set up your free Koinly account: add all the wallets, exchanges and blockchains you use via API or by uploading a CSV file of your transaction history. Koinly supports more than 600 exchanges, wallets and blockchains, including all the popular Australian exchanges like CoinSpot, CoinJar, Swyftx, and many more - we’ve even got step-by-step instructions on how to add each.
  2. Sit back and relax - Koinly is calculating your data: Koinly can identify your taxable transactions from non-taxable transactions, as well as the kind of tax that applies. It’ll identify your cost basis for each asset and calculate your subsequent capital gain or loss, as well as identify the fair market value of any crypto income in AUD on the day you received it.
  3. Check out your tax summary, dashboard and settings: Once Koinly has done its thing, you can head to the tax reports page to see your tax summary for the 2021 - 2022 financial year, including your short and long-term capital gains or losses, income, expenses and more. Because Koinly also works as a portfolio tracker, if you’ve still got time before the EOFY, you can head over to your Koinly dashboard to check if you have any unrealised losses or gains to harvest. Finally, head over to settings to pick your cost basis method to reduce your tax liability - we support FIFO, HIFO and LIFO.
  4. Download your ATO crypto tax report: When you’re ready to file with ATO, just upgrade to the paid plan you need and download your ATO crypto tax report when you need it. Koinly offers a range of tax reports for Australian investors, including the ATO myTax report, Complete Tax Report and Capital Gains Tax report.

Koinly and ATO crypto tax

Once you’ve got your Koinly report (or calculated your crypto taxes yourself), you’re ready to file. Here’s how.

How to declare crypto to the ATO

Whether you’re filing with myTax or with paper forms - declaring your crypto to the ATO is easy. You’ll declare your crypto in your annual tax return. 

Filing with myTax

Filing with myTax? Download your ATO myTax report.

For crypto capital gains or losses: Check 'Australian interest, or other Australian income or losses from investments or property', then 'Capital gains or losses that are not from a managed fund'. Enter the capital gains figures from your Koinly ATO myTax report on the Capital Gains or Losses page.

For crypto income: Check 'You had other income not listed above'. Under 'other income', add the total figure from your Koinly ATO myTax report.

Filing with paper forms

Filing with paper forms? Download your Koinly tax report.

For crypto income: Declare your total crypto income on question two of the Tax return for individuals form.

For crypto capital gains: Check yes on question 1 of the Tax return for individuals form. Complete question 18 of the Tax return for individuals (supplementary section). Report gains on 18H and losses on 18V. Report the final figure on 18A. If your total gain or loss is greater than $10,000, complete the Capital Gains Tax schedule.

Once you’ve declared your crypto to the ATO - you need to make sure you have good records of your crypto transactions because ATO crypto tax audits are on the rise.

ATO crypto records

The ATO says investors should keep records for 5 years after you “prepared or obtained the records”, or “completed the transactions or acts those records relate to”, whichever is later. You need to keep the following records:

  • The date of your crypto transactions.
  • The value of the cryptocurrency in Australian dollars at the time of the transaction (which can be taken from a reputable online exchange.)
  • What the transaction was for and who the other party was (even if it’s just their cryptocurrency address).
  • Receipts of purchase/transfer of cryptocurrency.
  • Records from exchanges.
  • Records of agent, accountant and legal costs.
  • Digital wallet records and keys.
  • Software costs related to managing your tax affairs, like Koinly.

ATO crypto transaction records

Koinly keeps historical records of your crypto transactions for six years - so there’s no need for you to keep hundreds of spreadsheets just in case of an audit.

Bonus: FAQS

We’re all about helping you stay compliant with the ATO when it comes to your crypto - so as a bonus, here’s some of our most frequently asked questions about cryptocurrency and the ATO.

How are NFTs taxed by the ATO?

We’ll include a bonus section here as it’s a question we get asked a lot. The ATO views NFTs like any other cryptocurrency, so the same tax rules apply. In summary:

  • Buying NFTs: As you’ll mostly be buying with crypto, this will be seen as a crypto to crypto trade and any profits subject to Capital Gains Tax. An exception to this rule would be if you bought crypto solely for the purpose of buying an NFT, for example if you bought ETH with AUD and then immediately bought an NFT for less than $10,000 - this would likely allow you to use the Personal Use Asset rule and the transaction would be tax free.
  • Selling NFTs: This depends on whether you’re a creator or just an investor. If you’ve bought and later sold an NFT, any profits would be subject to Capital Gains Tax. However, if you’re creating NFTs and selling them - like an artist - this will be seen as an additional income and you’ll pay Income Tax instead.
  • Trading NFTs: Trading NFTs is seen as a crypto to crypto trade and you’ll pay Capital Gains Tax on any profits as a result of a trade.

Check out our NFT tax guide for more information.

Do the ATO know I have crypto?

A resounding yes. If you use an Australian cryptocurrency designated service provider (DSP), then the ATO probably already has your data. The ATO has had a data sharing program with transaction data from as long ago as 2014. 

Last year, the ATO surprised thousands of crypto investors with a warning letter reminding them to report and pay their crypto taxes. It's very likely they'll be posting out similar letters this year.

Is a coin swap a CGT event?

Yes. The ATO says swapping one cryptocurrency for another is a CGT event. You’ll pay Capital Gains Tax on any profit you made as a result. To calculate this, subtract the cost basis of the crypto you’re swapping from the fair market value in AUD on the day you swapped it. If the price has risen, you have a profit and you’ll need to pay Capital Gains Tax on that profit. 

Is crypto considered an asset in Australia?

Yes. The ATO does not view crypto as a currency. Instead crypto is classed as property and an asset for Capital Gains Tax purposes.

Get your crypto tax report today!

The information on this website is for general information only. It should not be taken as constituting professional advice from Koinly. Koinly is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances. Koinly is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website.

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