Crypto Trader Tax Guide Australia
Our guide covers everything you need to know about crypto trader tax, what the ATO categorizes as a sole crypto trader, how much tax crypto traders pay, crypto business taxes, and even how to reduce your tax bill. Let’s dive in.
Crypto investor vs. crypto trader
The ATO generally views crypto hodlers in one of two ways - either as an investor or as a trader. The category you fall into dictates the way you’re taxed. How do you know which you are? The ATO has guidance.
Crypto investor
We’ve got a complete guide to crypto taxes in Australia for individual investors, but in brief, a crypto investor is exactly what it sounds like - an individual investing in a future return. In this instance, an individual investor buys, trades, and sells cryptocurrencies to gradually build wealth over a long period of time.
Crypto trader
Meanwhile, a crypto trader is an individual actively investing in the crypto market to generate an income, both short and long-term, who is essentially operating a business setup. This could include regular day trading to generate short-term profit, crypto mining, running a crypto exchange, and more.
The ATO says not all investors acquiring and disposing of crypto will be considered traders. It states the following factors may indicate you’re carrying on a business:
You carry on your investment activities for commercial reasons and in a commercially viable way.
You undertake activities in a business-like manner, for example, having a clear business plan and acquiring capital assets in line with your business plan.
You intend to make a profit and genuinely believe you’ll make a profit, even if you are unlikely to do so in the short term.
Your investment activities are regular and repetitive.
It’s important to note that the ATO also states that there may be situations where an isolated crypto transaction (or series of transactions) may be viewed as commercial and treated as ordinary income instead.
Crypto trader vs. crypto business
To further confuse things, it also matters if you’re operating as a sole trader or if you’ve created and registered a company from a tax perspective, according to the ATO. The differences are plentiful, but in summary:
Sole traders can utilise the tax-free threshold. Companies have no tax-free threshold and pay tax on every dollar the business earns.
Sole traders pay the individual Income Tax rate, while companies pay the 30% tax rate (although they may pay a reduced rate if eligible).
Sole traders lodge an individual tax return each year, while a company would need to lodge its own tax return as a separate legal entity (and you'd still need to lodge an individual tax return).
For Capital Gains Tax, sole traders may be able to reduce the capital gain through the discount method, indexation method, or through one of the 4 Capital Gains Tax concessions available for small businesses. For companies, the discount method does not generally apply when calculating capital gains. It’s important to note that for crypto traders or businesses, these discounts generally won’t be applicable - these discounts only apply when a business has a CGT asset outside its ordinary course of business (like if a restaurant sold a property). Because crypto is treated as trading stock for businesses and sole traders, these CGT discounts would only be eligible for non-crypto assets.
Both sole traders and companies may access small business tax concessions, including income tax concessions and PAYG instalment concessions.
All this to say, the business structure you’ve elected to use matters. A crypto mining business could be considered a sole trader or a registered company, depending on which business structure you've opted to use. Similarly, a crypto trader could be regarded as a crypto business if the individual puts all their crypto trading activities through a registered company.
Do crypto traders pay tax?
Yes. Crypto traders pay Income Tax on their profits.
How are crypto traders taxed in Australia?
If you are viewed as a trader, this dictates how you’re taxed. We’ll start with the bad news first - the Capital Gains Tax rules don’t apply to traders as crypto is treated as trading stock instead. So, crypto traders in Australia cannot access the 50% long-term Capital Gains Tax discount that individual investors can.
Instead, all your profits are viewed as ordinary income and subject to Income Tax (based on the individual Income Tax rate).
However, this comes with some good news, because the cost of acquiring crypto held as trading stock is deductible. We’ll explain with an example.
EXAMPLE
You sell 1 BTC for $58,000 AUD and make an $8,000 profit as you bought it for $50,000 earlier in the same year. The $58,000 sale is considered to be taxable income, and the $50,000 cost is deemed to be an expense of the trading business. On the same day, you purchase 10 ETH for $42,000. This $42,000 is another trading expense of the business and therefore tax deductible.
Assuming you made no other sales or purchases in the year, your net income from your crypto trading business would be a loss of $36,000 ($58,000 - $50,000 - $42,000). These losses can be used against your future ordinary income to reduce your tax liability.
How much tax do crypto traders pay?
The tax rate for sole crypto traders is the same as the individual Income Tax rates. You can see the individual Income Tax rates for 2024-25 below:
| Taxable income | Tax rate |
|---|---|
| 0 – $18,200 | 0% |
| $18,201 – $45,000 | 16% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001+ | 45% |
So the amount of tax you pay will be based on your total annual income. You won’t pay the same flat rate on all income either, the ATO individual Income Tax rates are progressive, so you’ll pay a higher rate of tax on higher earnings.
Which crypto transactions will you pay tax on?
So you know how you’re taxed and how much you’ll pay in tax… but when will you be taxed?
Many crypto transactions are taxable for crypto traders, including:
Any profit from selling, trading, spending, or gifting crypto, including profits from trading crypto derivatives, futures, and leveraged products
Earning crypto, including from staking and mining rewards, being paid in crypto, airdrops of crypto (except initial allocation airdrops), and earning new tokens from DeFi transactions
There are a select few transactions, however, that are tax-free (and even deductible!) for crypto traders, including:
Buying crypto with AUD
Hodling crypto
Transferring crypto between your own wallets and related gas fees may be tax-deductible
How to reduce taxes as a sole trader
To reduce your tax liability, it’s crucial to track all business-related expenses throughout the year. If these expenses relate to your sole trader business, you can claim them as tax deductions. According to the ATO, a business expense must meet three criteria to be deductible:
It must directly relate to running your business, not for personal use.
For expenses used for both business and personal purposes, you can only claim the portion used for business.
You must have records to prove the expense. Records don’t always have to be receipts; bank statements, emails, or other evidence can be acceptable.
You can claim anything you purchase that’s used to generate business income, provided you keep records. If you work from home, you can also claim a portion of home-related expenses. The amount you can claim is based on the proportion of your home used for business. For example, if your home office is 25% of your home’s total area, you can claim 25% of relevant costs. These might include rent, mortgage interest, utilities (e.g., phone, internet, electricity), cleaning, or repairs.
In addition, you can claim general office expenses like stationery, printer supplies, and depreciation of assets (items that lose value over time). Depreciating assets include computers, office equipment, furniture, carpets, and curtains.
Sole traders and freelancers with an annual turnover under $500 million can instantly deduct assets worth less than $150,000 in the year of purchase. For instance, if you buy $15,000 worth of computer equipment, you can claim the full amount as a deduction for that year. However, it’s essential to maintain accurate records of all claims.
Read next: How to (Legally) Avoid Crypto Tax in Australia
How to calculate your crypto taxes as a trader
Crypto traders are limited to using the FIFO accounting method (which Koinly supports).
Calculating your crypto taxes as a sole trader is thankfully pretty straightforward, although we still recommend using an accountant to ensure you're filing correctly, as things can get tricky fast! Just subtract all your purchases from your sales, and add in any other relevant income (minus expenses) from other crypto activities to give you your total annual income from crypto. Assuming it’s a profit, this is what you declare to the ATO.
How to report and pay crypto tax as a trader
Sole traders have slightly different tax reporting requirements compared to individual investors. There’s no separate business tax return for sole traders; instead, you file your annual Income Tax return and report all your income, including crypto, in the business items section. You can do this using the ATO’s myTax service, just like an individual taxpayer. You’ll also need to report your opening and closing balances.
For crypto traders, tax payments work a bit differently. The ATO expects traders to set aside money for Income Tax by the end of the financial year. Most traders meet this obligation through the Pay As You Go (PAYG) scheme. After your first tax return that shows income above the $18,200 tax-free threshold, the ATO will automatically opt you into PAYG. Alternatively, you can voluntarily opt in and make quarterly tax payments to avoid a large bill at the end of the year.
If you’re a sole trader earning more than $75,000 a year, you’ll need to register for an Australian Business Number (ABN). Additionally, some sole traders may qualify for the small business Income Tax offset of up to $1,000.
Read next: What are the penalties for crypto tax evasion in Australia?
How to calculate your crypto taxes as a trader
Koinly can help crypto traders with their ATO tax reporting obligations.
All you need to do is sync the wallets, exchanges, and blockchains you use with Koinly via API or by uploading a CSV file of your transactions. Koinly will then crunch the numbers for you and generate your crypto tax report. Traders may need a few tax reports - the Buys/Sells report, the Start/End of Year Report, and/or the Complete Tax Report - depending on their investments. You can then use these figures to file with the ATO.
Sign up for free and try Koinly today.
