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Australia crypto tax guide

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Crypto Tax Australia: Here’s How Much You’ll Pay in 2022

Last updated: Friday, 22 April 2022

Wondering how much tax you’ll pay on cryptocurrency in Australia? This guide will cover everything you need to know! We’ll talk about crypto capital gains tax, we’ll cover crypto income tax, and we’ll look at how much tax you’ll need to pay. Plus, we’ll share strategies that help you avoid paying too much tax. Finally, we’ll take you on a step a step walkthrough on how to file your crypto using myTax. Let’s go!

How much tax do you pay on Crypto Australia?

In Australia you’ll pay Capital Gains Tax and Income Tax on your crypto investment. The percentage of Capital Gains Tax you'll pay is the same as your personal Income Tax rate, starting only from earnings above $18,201. If you hold for a year, you’ll pay 50% less capital gains tax on crypto gains.

If you’ve sold, traded or earned cryptocurrency in the last financial year, you'll need to declare this to the ATO in your annual tax return.

This guide is regularly updated

Our Head of Tax at Koinly keeps a very close eye on the ATO's crypto policies and regularly update this guide to keep you informed and tax-compliant.
22 April 2022: EOFYS is near! Guide updated for 2022.
01 Dec 2021: Tax rates 2021-2022 updated.
30 June 2021: Watch our Aussie Crypto Tax Guide here and on Youtube.
28 May 2021: The ATO issued a statement addressing crypto investors. Read it here.
13 May 2021: Guide updated for 2021.
22 June 2020: ATO warns 350,000 investors to disclose or face penalties.
24 July 2019: Welcome to your Australian cryptocurrency tax guide!

Can the ATO track crypto?

Yes. - the ATO can track crypto. If you have an account with an Australian cryptocurrency designated service provider (DSPs), then it's likely that the ATO already has your data.

  • The ATO has a data sharing program with all Australian exchanges.
  • The ATO knows who has crypto transaction data from as far back as 2014.
  • The ATO has the know your customer (KYC) information you provided when signing up for any Australian exchange or wallet.

In 2020 and 2021, hundreds of thousands of Australian crypto investors were treated to a letter from the ATO warning that crypto was indeed taxable, and that failure to declare could result in penalties for tax evasion. In the 2021 warning letter, recipients were given 28 days to disclose their crypto trades. It is likely the ATO will issue similar letters in 2022.

How is crypto taxed in Australia?

The Australian government does not see Bitcoin and other cryptocurrencies as money nor foreign currency. Instead, the ATO classes crypto as property, and as an asset for Capital Gains Tax (CGT) purposes. But depending on the specific transaction, crypto may also be viewed as additional income and taxed as Income Tax. How you're taxed depends on your 'intentions' and setup, as well as the specific transactions you're making.

Crypto is an asset in Australia

The tax treatment of your crypto will depend on whether you're seen as an individual investor or a trader making a regular income.

Crypto investor vs. trader

The ATO has different tax rules for individual investors, and for taxpayers who make a regular income from trading.

Similarly, the ATO views crypto users as either a trader or an investor for tax purposes. The lines can get a little fuzzy. Read here for more advice from the ATO, but in general, the following is a good guide:

The ATO will tax Australian crypto trades based on whether you are an investor or a trader

Investor: An investor is just that - an individual investing in a future return. An investor buys and sells crypto as personal investment 'stock' with the goal of gradually building wealth over an extended period of time with profit made from long-term capital gains. Most Australian crypto users fall into this category and any profits gained will be subject to Capital Gains Tax. In some cases, Income Tax may also apply - depending on how the crypto was acquired.

Trader: A trader is active in crypto as a means to generate an income and is operating from a business setup. If you're running a crypto trading, forging or mining business, regularly buying and selling for short term gains, or running a crypto exchange, the ATO may tax you as a trader. The ATO‚Äôs definition of a trader is someone who undertakes ‚Äúbusiness activities for the purpose of earning income from buying and selling shares‚ÄĚ. Relevant issues in determining the tax status of a taxpayer include the use or not of trading systems, the volume of transactions, the existence of a business plan, a profit motive, and records being kept in a ‚Äúbusiness-like manner‚ÄĚ. Proceeds are taxed as income.

Investors can access the 50% Capital Gains Tax discount for long-term gains, whereas traders can not.

With that out the way, let's take a look at the general crypto tax rules in Australia for individual investors.

Capital Gains Tax on crypto

A Capital Gains Tax (CGT) event occurs when you dispose of your cryptocurrency. Dispose doesn't just mean sell though. In general we can think of a disposal as any time your crypto trades ownership.

Koinly Crypto Tax Australia Guide

There are 4 ways you could pay Capital Gains Tax on crypto in Australia:

  1. Sell crypto for AUD (or another fiat currency).
  2. Swap crypto for crypto, including stablecoins.
  3. Spend crypto on goods and services (if not seen as a personal use asset).
  4. Gift crypto.

Remember - if you hold your crypto for one year before you make a disposal - you'll pay 50% less tax on any capital gains.

Capital Gains Tax rate

If you’re selling, trading, spending or gifting crypto as an individual (investor), the percentage you’ll pay on Capital Gains Tax is the same as your Income Tax rate. Your income tax rate depends on your total income during the tax year.

ATO Individual Income Tax Rates 2021‚Äď2022

IncomeTax Rate
$0 - $18,2000%
$18,201 - $45,000Nil + 19% of excess over 18,200
$45,001 - $120,000$5,092 + 32.5% of excess over 45,000
$120,001 - $180,000$29,467 + 37% of excess over 120,000
$180,001+$51,667 + 45% of excess over $180,000
Source: ATO. The above rates do not include the Medicare levy of 2%

How to calculate crypto capital gains

Whatever you're trading - calculating capital gains works in the same way, including for crypto.

A capital gain or loss is the difference in value from when you acquired your crypto to when you sold or otherwise disposed of it. If you have a profit from your crypto increasing in price, then you have a capital gain and you'll pay Capital Gains Tax on that profit. If you have a loss from your crypto decreasing in price, then you have a capital loss (and you won't pay tax).

To calculate whether you have a capital gain or loss then, you need to start by knowing your cost basis. Put simply, your cost basis is whatever it cost you to acquire your crypto plus any related fees - like purchase or sale fees.

Cost basis formula

Once you know your cost basis, simply subtract this from the sale price of your crypto. If you otherwise disposed of your crypto - subtract this from the fair market value of your crypto in AUD on the day you disposed of it.

Capital Gain/Loss formula

EXAMPLE

Craig buys 1 ETH in Jan for $1,000 at a fee of $100. In May of the same year he sells his 1 ETH for $2,000 at a fee of $100. To buy his initial $1,000 worth of ether he paid a $100 fee. His cost basis is thus $1,100.

In May of the same year he sells his 1 ETH for $2,000 at a fee of $100.

His capital gain is the new value of $2,000 less the cost base of $1,100, and the new fee of $100 to arrive at a sales proceed of $800. Craig's $800 gain will be taxed according to his Income Tax rate as Capital Gains Tax. If he waited to sell after a year had passed Craig could half his Capital Gains Tax - he'd pay only 50% of $800, using the Capital Gains Discount.

Crypto tax breaks

Australian taxpayers get a little breathing space with a number of tax-free thresholds and allowances that happily apply to crypto too.

Koinly Crypto Tax Australia

1. Tax free threshold: You'll only start to pay Income Tax when you hit $18,200 in total income per year.

2. 50% Capital Gains Tax discount: If you hold your cryptocurrency for more than a year before selling or trading it, you may be entitled to a 50% CGT discount. And even if the market value of your cryptocurrency changes, you won't make a capital gain or loss until you actually dispose of your holdings.

3. Personal use asset: You can get an exemption from capital gains tax if you hold cryptocurrency as a personal use asset. If you purchase no more than AU$10000 of cryptocurrency to directly buy something else with crypto, that too over a short time period, you're eligible for this exemption.

A cryptocurrency may be considered a personal use asset in the following situations: 

  • You want to buy an NFT so you spend Australian dollars to buy Ethereum - which you immediately use to buy the NFT. The Etheruem would be considered a personal use asset because you‚Äôve held it for a short time and used it to purchase a NFT for your own personal use.¬†
  • You regularly purchase $20 worth of Bitcoin every month to pay for an online newsletter subscription service. During each of the same months, you use that Bitcoin to pay for your subscription. The Bitcoin is always being held for a short period, with the sole purpose of paying for a service for your own consumption, therefore the disposed Bitcoin would be considered to be a personal use asset.¬†

When the crypto is acquired and held for some time before any such transactions are made, or if only a small portion of the crypto is used to make some transactions, it's unlikely that the crypto is a personal use asset. A cryptocurrency is unlikely to be a personal use asset in the following situations:

  • When you have to exchange the crypto to Australian dollars or some other cryptocurrency to purchase the items for personal consumption.
  • If you have to use a payment gateway or other payment intermediary to acquire the items on your behalf (as opposed to using crypto directly).

The time of disposal of the crypto is the key to working out if it's a personal use asset. The longer the crypto is held, the more unlikely it is to be considered a personal use asset ‚ÄĒ even if you ultimately use it to purchase items for personal consumption. This is because you have likely benefited from an increase in the value of the crypto during the holding period.¬†

So use this provision with care. If you end up getting investigated by the ATO, the burden of proof is on you to show that the crypto was, in fact, a personal use asset. Also, all capital losses you make on personal use assets cannot be written off against capital gains at any point.

Tax on crypto capital losses

If the proceeds from the disposal of your crypto is less than what you paid to acquire it initially, you'll see a loss. If you make a net capital loss then you can deduct the loss from any other class of asset gains, and even carry over the loss to future years.

Losses can offset gains made on crypto investments, share investments and even property investments. However, you can't deduct a net capital loss from your other income.

Capital losses crypto

Tax on lost or stolen crypto

The crypto industry is rife with scams and hackers, and far too many investors have fallen foul of losing their private keys and access to their wallet. Well, it's good news for Aussies as you have a lot of avenues available to you to recoup your losses - whether that's by claiming for a capital loss or realizing a loss through a transaction.

All this depends on the exact way you lost your crypto, so we'll cover some common scenarios.

If you lose your private key or your crypto is stolen by a hacker or scammer, you may be able to claim a capital loss.

Australia crypto tax lost or stolen

The potential claim is based on whether the amount lost can be replaced. So if you've lost your private key and you'll never be able to access your crypto again, this is more likely to be a successful capital loss claim. Similarly, if you had your crypto stolen in a phishing scam and you had no hope of retrieving it, you would be more likely to successfully claim a capital loss with the ATO.

On the other hand, if your crypto was stolen in a major hack of an exchange - if the exchange is likely to reimburse you for your loss, you would be unlikely to be able to claim a capital loss with the ATO.

Furthermore, you'll need a lot of evidence to claim a capital loss due to loss or theft with the ATO. The ATO will require you to provide evidence such as:

  • The wallet address that the key belongs to
  • When you acquired the key and when you lost it
  • The cost of acquiring the stolen/lost cryptocurrency
  • The fact that the wallet was controlled by you
  • The amount of cryptocurrency at the time that you lost the key
  • That you possess the hardware where the wallet is stored
  • The transactions to the wallet from an exchange which is linked to your identity

Another common way investors lose out is through rug pulls or other similar scams where the price of a given token or coin is hyped, overinflated and then the creators quickly make off with investors money while the value plummets to zero. Some notable examples in recent years include the Squid Game rug pull and the Luna Yield rug pull. Of course, coins and tokens can also plummet to zero without an obvious sign of a scam - as with the Terra crash.

In this instance, you haven't actually lost your tokens, nor access to them (unless the blockchain is halted). So the likelihood of making a successful claim for a capital loss is low. Instead, you need to realize your loss in order. This means you need to make a capital disposal - by selling, swapping, spending or gifting your crypto. So you can:

  • Sell your tokens on an exchange if possible.
  • Swap your tokens for another token - potentially using a native wallet to do so if exchanges have halted transactions with a given token.
  • Spend your tokens with a DeFi protocol if possible.
  • Gift your tokens by sending it to a friend, family, or stranger.
  • Send your tokens to a burn wallet.

Once you've realized your loss, you can use it as a capital loss and offset it against any capital gains for the year, or carry it forward to future tax years if you have more losses than gains. Remember, to best utilize capital losses, you should offset them against your short-term capital gains first!

In the rare instances where a blockchain halts transactions permanently and you're unable to move or transact with your crypto, you would potentially be able to make a claim for a capital loss should the company go into liquidation. Please note, this guidance currently only applies to stocks, so there is no precedent for the crypto market. In other words, if possible - realize your loss!

Income Tax on crypto

There are cases where crypto is treated as income and thus attracts Income Tax, especially if the ATO views you as a trader, versus an individual investor.

Koinly Crypto Tax Australia Guide

As an individual investor, 'traditionally' you're about the long game, the capital gains. You could earn income from crypto in a number of ways, but it's easy to start 'acting' like a trader, so move with caution.

Three of ways that make sense from a 'labour' perspective is to earn crypto is by:

  • Getting your salary paid in crypto
  • Selling NFTs you create - like an artist.
  • Become a validator and earning through PoS or PoW.

You're taxed differently if you're seen to be acquiring new mining tokens as a hobby miner, than as a commercial operation.

There are also 'engage-to-earn' platforms that pay out crypto based on various activities:

  • Receiving airdrops.
  • Referral rewards like Binance Referral.
  • Learn to earn campaigns, like Coinbase Learning Center or CoinMarketCap Learning Center.
  • Watch to earn platforms like Odysee.
  • Browse to earn platforms like Permission.io browser extension or Brave.
  • Play to earn games like Axie Infinity.
  • Shop to earn through browser extensions like Lolli.
  • Share to earn on platforms like Moon Faucet.

DeFi - or decentralized finance - has opened a world of opportunities to use your own crypto to earn more crypto.

  • Earning interest through yield farming on lending protocol like AAVE or Compound.
  • Earning new liquidity pool tokens, governance or reward tokens on protocols like Uniswap.
  • Lending your crypto to platforms like NEXO to earn interest.
  • Earn crypto dividends on platforms like CoinRabbit.

Tax free crypto

It's not all bad news. Certain crypto activities are tax-free in Australia. But a word of caution, some provisions are straightforward - like not having to pay tax when buying or holding crypto. Other seemingly tax-free transactions can quickly blur the lines, especially when it comes to DeFi transactions, or crossing the boundary from 'investor' to trader.

Koinly Crypto Tax Australia Guide

Broadly, here's when won't pay tax on crypto in Australia:

  • Buying crypto.
  • Holding crypto.
  • Acquiring crypto as a gift.
  • Acquiring crypto from hobby-level crypto mining.
  • Transferring crypto between you own wallets - but watch out for transfer fees.
  • Buying goods and services under $10,000, if it's a personal use asset.
  • Donating crypto to registered charities.

Tax on buying crypto

Do you pay tax when you buy crypto in Australia? According to the ATO, it all depends on how you pay.

Buying crypto is tax free in Australia

Buying cryptocurrency with fiat currency

You're not taxed when you buy cryptocurrency in Australia. Crypto is also GST-free.

However, keeping accurate records of the purchase is very important so that you can calculate the cost basis of the transaction when you decide to sell or 'dispose' of your crypto - as that is the moment when you will have to pay tax.

Koinly is not just a crypto tax calculator but a crypto portfolio tracker too - the perfect tool to keep a hold on your crypto purchase and sale dates.

Buying crypto with AUD is tax free

TAX FREE

Buy and HODL

If your strategy is to simply buy and hold your crypto, then you don’t need to pay tax on your cryptocurrency you hodl, even if the value of your portfolio increases. The taxable event is when you sell, exchange or gift your crypto.

TAX FREE

Buying crypto with crypto

Buying, swapping or trading one crypto for another (ex. BTC ‚Üí XRP) is a taxable event in Australia. The ATO sees a trade as 2 separate transactions, first you are selling your BTC for X amount of fictional dollars, then you are buying ETH with these fictional dollars.

Even though you never received any dollars in hand, you still have to pay tax on the sale of the BTC.

The market value (in AUD) of the purchased coins is used to determine the capital gain. If the cryptocurrency that you received can't be valued, you will have to take into account the market value of the crypto you sold at the time of the transaction.

A stablecoin - like Dai, TrueUSD or Australia's AUDT, is simply a class of cryptocurrency that offers price stability. That's because stablecoins are backed by a reserve asset, usually a stable fiat currency like USD or AUD. As far as the ATO is concerned however, stablecoins like TrueUSD are exactly the same as any other cryptocurrency, and so the tax treatment - Capital Gains Tax - is the same as for regular crypto to crypto exchanges.

EXAMPLE

Let's say you purchased 1 BTC for $1,000 in July 2017.

In November 2017, you exchanged 0.5 BTC for 3 ETH. Let's imagine that at this time, the market value of 3 ETH was around $2,000.

This means your capital proceeds come to $2,000 and the cost of acquisition is $500. In other words, your capital gain would be $1,500.

CAPITAL GAINS TAX

Tax on selling crypto

If you're investing in crypto the day will surely come where you want to - or need to - cash out. How will the ATO snare you at this crucial moment? It all depends on your level of patience.

Tax on selling crypto in Australia

Selling crypto for fiat

According to the ATO, selling crypto for fiat currency, such as the Australian dollar, is a taxable event. Profit made from the sale of cryptocurrency attracts a 100% Capital Gains Tax in the first year, 50% in subsequent years.

EXAMPLE

Craig purchases 0.1 BTC in July 2017 for $1,000 and sells it in November 2017 for $2,000 Australian dollars. His total capital gain is thus $1,000.

CAPITAL GAINS TAX

Selling crypto for crypto

As with buying crypto with crypto, selling, swapping or trading one cryptocurrency for another is a taxable event too, and Capital Gains Tax applies.

This applies to stablecoins too. Selling a coin like ETH for a stablecoin like Dai is unfortunately seen as disposal, just the same way selling ETH for BTC is.

CAPITAL GAINS TAX

Moving crypto between wallets, exchanges and pools

The ATO has confirmed that when you're moving crypto around between your own wallets - this isn't seen as a disposal and you don't need to report it or pay Capital Gains Tax. However, nothing is quite so straightforward in the world of crypto and transactions like adding and removing liquidity may get a little more confusing from a tax perspective.

Moving crypto between wallets

Moving crypto between different wallets that you own is not a taxable event and does not trigger Capital Gains Tax.

Transferring crypto is tax free

Having said that, it's important to keep track of these movements because automated crypto tax software like Koinly use these movements to calculate the cost basis of each movement.

EXAMPLE

Let's say Sam buys 4 LTC for $1,000 on Coinbase. She later moves the funds into her private LTC wallet. A few days later she transfers the LTC from her private wallet to her Binance account and sells it for $2,000, making a profit of $1,000.

If Sam wants to use Koinly to generate her crypto tax report, she will have to connect all three wallets. If she doesn't sync her private wallet but only syncs the Coinbase and Binance account, Koinly won't be able to identify that the funds she transferred into her Binance account are the same funds she purchased on Coinbase.

However, once Sam adds her private wallet address, Koinly can match the transfer by tracing it from Coinbase to her wallet and then from her wallet to Binance. This will help in producing an accurate tax report.

If she no longer has access to her private wallet, she will have to make some manual changes using the Koinly web interface. She will have to mark the transfer from Coinbase as Ignored so that Koinly doesn't realize gains on it and she doesn't have to pay taxes twice. She would then change the value of the incoming transaction to Binance to match the cost-basis of the outgoing transaction from Coinbase.

TAX FREE

Transfer fees

Moving your own crypto between wallets? No doubt you'll pay a transfer fee or network fee to do so. If you're paying this in fiat currency, this is tax free. However, more often than not you're going to be paying for this transfer fee in cryptocurrency.

If you're using cryptocurrency to pay that fee you’re technically spending the asset - which is viewed as a disposal. This is a taxable event. So while transfers are tax free, transfer fees are not if you paid the fee in cryptocurrency. You'll need to calculate your cost basis and capital gain or loss.

The ATO has taken an official position on this: If the transfer fee was paid using crypto then that triggers Capital Gains Tax. You would need to work out the capital gain or loss for the portion of your crypto that was used to pay the transfer fee. The cost basis is the value of the fee amount at the time the fee was paid. See more on this from the ATO here and here.

EXAMPLE

You bought 1 ETH. The price of 1 ETH when you bought it is $4,385.

You decide you want to move your ETH from your Binance wallet to your MetaMask wallet. You're charged a flat fee of 0.005 ETH to do so.

You're paying in ETH - so you're disposing of your cryptocurrency. You'll need to calculate the cost basis and the fair market value of your crypto at the point of disposal. To keep it simple, let's say the price of ETH hasn't changed since you bought it.

0.005 ETH = $21.90. This is your disposal - you need to report this to the ATO as a disposal, regardless of the fact you have no capital gain or loss. Of course, doing this for every transaction can be time-consuming. Koinly can help you do this with our "treat transfer fees as disposals" setting.

CAPITAL GAINS TAX

Adding and removing liquidity

If you're adding or removing liquidity from various DeFi protocols, on the surface, this doesn't look like a taxable event. You're not disposing of your crypto and these transactions are more akin to a transfer.

However, if you receive a token in exchange for your share in the liquidity pool, this could be viewed as a crypto-to-crypto swap and subject to Capital Gains Tax. Each DeFi protocol works slightly differently - your best bet here is to speak to an experienced crypto accountant to ensure you remain tax compliant.

Liquidity pool transactions tax Australia

POTENTIAL CAPITAL GAINS TAX

How are airdrops and forks taxed in Australia?

Airdrops and forks are the windfalls of the cryptocurrency world, but will you need to pay tax on new assets from drops and chain splits? Will it be classed and taxed as some sort of income? Or are airdrops and forks tax free?

airdrops tax Australia

Receiving an airdrop

The ATO has stated that any airdrops received are considered ordinary income at the fair market value of the tokens on the date you received them. Airdrops are akin to bonuses.

"The money value of an established token received through an airdrop is ordinary income of the recipient at the time it is derived."

This applies to both participant and involuntary airdrops.

To figure out how much Income Tax you need to pay, calculate the fair market value of your airdropped crypto on the day you receive it and apply your income tax rate. The cost basis here is usually $0.

airdrop tax Australia

EXAMPLE

You receive 300 1INCH tokens from an airdrop. On the day you receive them, the fair market value per token is $3.5. Your tokens are subject to Income Tax, so you need to calculate their total worth.

$3.5 x 300 = $1,050. You report $1,050 of income on your Individual Tax Return Form.

INCOME TAX

Selling or trading your Airdropped coins

If you sell, swap, spend or gift your airdropped coins or tokens, the disposal is treated as a normal capital gains event.

The cost basis here is the value of the coins when they were first airdropped to you.

EXAMPLE

You sell your 300 airdropped 1INCH tokens a couple of days after. The fair market value per token is $4, so you make $1,200. You can use the calculation above as your cost basis.

$1,200 - $1,050 = $150. You report a capital gain of $150 on your Individual Tax Return Form.

CAPITAL GAINS TAX

Receiving crypto from a hard fork

The ATO has two rules for hard forks and it depends on whether you’re an investor or running a cryptocurrency business. If it’s the latter, you’ll need to follow trading stock tax rules, not crypto tax rules.

If you’re an investor, you won’t pay Income Tax on any new coins received as a result of a hard fork. The cost basis for new coins from a hard fork is zero.

The ATO offers more detail on fork scenarios here.

Hard forks tax Australia

TAX FREE

Selling crypto from a hard fork

The ATO is very clear that the cost basis for new coins from a hard fork is zero, so you’ll pay Capital Gains Tax on the total value of your coin as it’s all seen as profit.

One of the ways you can reduce this taxation is to HODL. Australian investors who hold assets for longer than a year enjoy a 50% long-term Capital Gains Tax discount when they sell, swap, spend or gift them. This discount would apply to coins received from a fork, just as it would to any other crypto asset held for more than a year.

EXAMPLE

You received 1 BCH in 2017 when it split from BTC. Your cost basis for this new coin is $0. You sell it a couple of months later at its peak for $2,000. Because your cost basis is zero - the whole $2,000 is viewed as profit by the ATO and subject to Capital Gains Tax.

CAPITAL GAINS TAX

Token address change/mainnet launch

When a cryptocurrency changes its underlying tech for ex. when EOS went from the ETH blockchain to the EOS mainnet or when DAI changed its contract address and named the old coin SAI - there are no tax liabilities.

Note that if your old coins continue to hold value even after the new ones have been issued then the ATO may consider this as a fork and not a swap - this may give rise to a Capital Gains Tax event.

TAX FREE

Crypto Gifts and Donations Tax

Gifts and donations are tools often used in tax minimisation, but will it work for crypto tax in Australia? Here's what the ATO has to say about how crypto donations and gifts are taxed.

Giving a crypto gift

This is going to hurt. Whether your reason for gifting your crypto is altruistic or opportunistic, the ATO cares not and will happily ask you to pay Capital Gains Tax on any perceived profits from the disposal.

Crypto Gift Tax Australia

CAPITAL GAINS TAX

Receiving crypto as a gift

If someone gives you crypto as a gift, consider yourself lucky for two reasons. You've just scored some crypto and you don't pay any tax.

Receiving crypto as a gift is not a taxable event. But, you will need to keep a record of the fair market value of the crypto on the day you received it. This will become your cost basis and you'll need this to calculate a potential gain or loss, should you decide to sell, or even re-gift your crypto gift.

TAX FREE

Selling your crypto gift

The bad news is back. While the receiving of a crypto gift is tax free, the disposal - be it by selling, swapping, spending, or re-gifting, is taxed as Capital Gains Tax.

Your cost basis will be the fair market value of the coins on the day you received them.

CAPITAL GAINS TAX

Donating crypto

In Australia crypto donations work the same as regular donations - they're tax deductible if you're donating to a deductible gift recipient (DGR)

You can claim the donated amount (calculated as the dollar price of the cryptocurrency at the time it’s donated) as a deduction on your tax return.

TAX FREE

Tax on mining crypto

Mining bitcoin in Australia? The ATO will tax your mining activities based on whether you're a hobby miner, or a trader. The lines can get blurry - In order to determine whether you are mining crypto as a business, check out this section of ATO's website.

Crypto mining tax Australia

Mining as a hobby

A hobby miner is someone who participates in cryptocurrency mining as an interest or pastime and not in a business-like manner seeking commercial profits. Their investment in mining tech will be relatively insignificant - a small scale operation at home - and intention to accumulate the rewarded coins rather than sell immediately to turn a profit.

Rewarded coins are not income but rather a capital acquisition.

The mined coins will be subject to capital gains tax on disposal. No expense deductions are allowable. It's also important to remember that personal use asset exemption rules don't apply to the capital gains made on disposal of mined cryptocurrency.

TAX FREE

Mining as a business

A person conducting their mining in a large scale business operation is a commercial miner. If you’ve invested extensively in equipment and are operating out of a dedicated space such as a data centre, then you’re in the business of mining. You may also be in the business of mining rather than accumulating the rewarded coins, you continually sell for an immediate profit.

Any proceeds you receive from a mining pool/service or your own mining rig are taxed as ordinary income and will need to be declared on your Income Tax return.

In order to determine whether you are mining crypto as a business, or at a hobby-level, check out this section of ATO's website

INCOME TAX

Selling mined coins

When you eventually sell your mined coins, you will still be subject to capital gains tax on the difference between the value you declared as Income and the value at the time of the sale.

CAPITAL GAINS TAX

Crypto margin trading, futures and other CFDs

The tax for crypto trading such as margin trading, futures and other CFDs is a little complicated, so let's break down the taxes on crypto trading.

Margin trading, futures and derivatives

Margin trading with crypto involves borrowing funds from an exchange to carry out your trades and then repaying the loan later. There is usually an interest payment involved as well.

The ATO does not currently provide any clear guidance on what taxes apply to cryptocurrency margin trading, futures, options, or other types of derivatives. If you are an investor, a common conservative approach is to record any gains or losses from these trades as capital gains or losses as you would with spot trades. In this case, CGT will apply.

While there is currently no guidance on how this is taxed, it is important to note that there is a clear difference between margin trading and trading with futures, so the rules that apply to futures trading/speculation may not apply to margin trades.

On a futures trade you are speculating on the rise and fall of a coin.

On a margin trade you are borrowing funds to carry out some trades.

Most exchanges have different platforms for both, for ex. Binance allows margin trading on spot markets, whereas you have to trade on a completely different platform if you want to do futures as well - Binance Futures.

Taking this into consideration, the conservative approach is to simply treat borrowed funds as your own investments and pay CGT on the repayment of the loan if the loan interest is charged in cryptocurrency (since this would be deemed a disposal).

CAPITAL GAINS TAX

Futures / contracts / options trading with crypto

In futures trading, you are not actually buying or selling any crypto. Instead you are speculating on the rise or fall of the price of a crypto asset in the future. When you close your position you will either make a profit or a loss (P&L).

There is no guidance from the ATO on how this P&L should be taxed. However, as you only realize a gain or loss when you close your position, it's likely any profit would be subject to Capital Gains Tax.

Note: If you're using Koinly to calculate your taxes then you can control how the P&L is taxed on the Settings page.

CAPITAL GAINS OR INCOME TAX

NFT taxes Australia

NFTs are another area of crypto which have exploded in the past year. Whilst the ATO hasn’t issued any specific guidance on NFTs taxes, it’s reasonable to conclude that these are considered to be digital assets in the same way other cryptocurrencies are, therefore they will also be considered capital property under Australian law. This means NFTs will be subject to the same tax rules as other crypto assets.

The tax treatment of the NFT will depend on how you interact with them.

Creating and selling NFTs

Creating and selling an NFT is akin to creating and selling any other product, and therefore qualifies as business income which will be subject to Income Tax. 

As well as this, farming NFTs for a staking reward will likely be considered to be income in the same way DeFi staking rewards would be.

INCOME TAX

Selling, trading and gifting NFTs

For those not deemed to be traders, you'll pay Capital Gains Tax when:

1. Buying an NFT with cryptocurrency: Capital Gains Tax due on any profit made on the cryptocurrency disposed of (unless this qualifies as personal use asset in which case no CGT will be due).

2. Selling an NFT for cryptocurrency or fiat currency: Capital Gains Tax due on any profit made on the NFT investment.

2. Swapping an NFT for another NFT: Capital Gains Tax due on any profit made on the NFT disposed of.

CAPITAL GAINS TAX

DeFi crypto taxes Australia

DeFi is still pretty new and it's constantly evolving, offering investors new opportunities to make money. All this to say, the IRS hasn't yet issued clear guidance on specific DeFi transactions and how they're seen from a tax perspective.

DeFi tax Australia

Don't jump for joy just yet. That doesn't mean you won't pay any taxes on your DeFi transactions. Instead, investors need to look at the current guidance on crypto transactions and infer the likely tax on their DeFi transactions.

DeFi - or decentralized finance - has opened a world of opportunities to use your own crypto to earn more crypto.

So you'll still pay either no tax, Income Tax or Capital Gains Tax on your DeFi transactions.

At a basic level, the tax you'll pay depends on whether you're seen to be 'earning' crypto or 'disposing' of crypto. Remember, earning crypto is anytime you're receiving new coins or tokens as a result of your transactions. This would cover many DeFi transactions. Meanwhile, when you're swapping, selling or spending tokens on DeFi platforms - this would be subject to Capital Gains Tax.

In summary, we can infer that the tax treatment of DeFi would likely break down into the following tax treatments:

  • Earning interest from DeFi protocols:¬†Income Tax if you earn new coins. Capital Gains Tax if you accrue value on LP tokens.
  • Borrowing from DeFi protocols:¬†Likely no tax unless you receive tokens in return for collateral.
  • Paying interest in DeFi protocols:¬†No tax unless you're paying in crypto, in which case, potentially Capital Gains Tax.
  • Selling or swapping NFTs:¬†Capital Gains Tax, although if you're selling NFTs as a creator, this could be viewed as additional income and Income Tax would apply.
  • Buying NFTs:¬†Capital Gains Tax (if you buy with crypto - which is the only option for most).
  • Staking on DeFi protocols:¬†Income Tax if you earn new coins or tokens. Capital Gains Tax if you accrue value on staked tokens.
  • Yield farming DeFi protocols:¬†Income Tax if you earn new coins or tokens, Capital Gains Tax if your tokens instead accrue value.
  • Earning liquidity tokens from DeFi protocols:¬†Income Tax or Capital Gains tax depending on whether you're earning new coins or increasing the value of one asset.
  • Adding liquidity to liquidity pools: Capital Gains Tax if you receive a token in exchange for your liquidity.
  • Removing liquidity from liquidity pools:¬†Capital Gains Tax if you exchange a token to remove your liquidity.
  • Earning through play/engage to earn DeFi protocols:¬†Income Tax.
  • Profits from DeFi margin trading and options protocols:¬†Capital Gains Tax.

We recommend speaking with an experienced crypto accountant for clear guidance on DeFi tax to remain compliant.

Earning from DeFi protocols

Earning new coins or tokens from DeFi?

Anytime you're seen to be 'earning' from DeFi - whether that's new coins or tokens - it's likely that the ATO will view this as additional income and you'll pay Income Tax based on the fair market value of the assets in AUD on the day you received them.

INCOME TAX

Selling or swapping tokens on DeFi protocols

Anytime you sell or swap a coin or token on a DeFi protocol, this is likely to be viewed as a disposal from a tax perspective, making it subject to Capital Gains Tax. You'll pay tax on any profits as a result of a disposal.

CAPITAL GAINS TAX

Participating in an ICO/IEO

ICOs (Initial Coin Offerings) or IEOs (Initial Exchange Offerings) refer to a situation where investors can purchase tokens/coins in a yet-to-be-released cryptocurrency/company. This purchase usually happens via an existing cryptocurrency likes Bitcoin or Ethereum.

From the ATO's perspective, this amounts to a crypto-to-crypto trade. The taxable event is triggered on the date of the ICO transaction, when you receive the new tokens. When you sell the new tokens at a later date, the cost base of that transaction will be the value of the cryptocurrency that you paid for it on the date of the ICO/IEO.

CAPITAL GAINS TAX

Signup & Referral bonuses

Any crypto you get in return for signing up or referring users to a service is taxed as Income. Referral bonuses are akin to the concept of commission.

INCOME TAX

Getting paid in Bitcoin

Whether you are freelancing or working for a company that pays employees in crypto, you can't escape income tax.

Any coins received as income are taxed at market value at the time you received them so make sure you declare this income on your annual tax return or you might end up facing the taxhammer.

INCOME TAX

Spending crypto

Spending long-held crypto or more than $10,000

The Personal Use Asset rule can apply to crypto but under very strict conditions.

Assets disposed of to buy personal goods valued under $10,000 are CGT-free crypto is used to pay for goods, the disposal will attract capital gains tax when:

1. The item value is over AUD $10,000, or

2. Goods are bought for business use, or as an investment, (so not for personal use)

3. Goods are bought with crypto held for a long period of time and/or initially bought for investment purposes. According to the ATO, the longer you hold a cryptocurrency, the less likely it is to be a personal use asset.

EXAMPLE

Jasmine has been regularly keeping cryptocurrency for over six months with the intention of selling at a favourable exchange rate. She has decided to buy pay for new furniture with some of her cryptocurrency. Because Jasmine used the cryptocurrency as an investment initially, the cryptocurrency - and its disposal - is not a personal use asset.

CAPITAL GAINS TAX

Spending crypto within the Personal Use Asset rule

While most assets attract capital gains tax in Australia, goods bought for personal use, such as clothes, are classed as personal use assets. Personal use assets do not attract capital gains tax. So, how does this personal use asset exemption apply to purchases paid for in crypto?

Ordinarily, when you pay with crypto, this looks like a 'disposal' - and that equals capital gains tax. However, capital gains tax may not apply to goods paid for in crypto when:

1. The item bought is for personal use (not for business, nor as an investment.) Ex. Clothes, airline tickets, sporting equipment.

2. The cryptocurrency used to pay is acquired and used within a short period of time

3. The item bought is priced under AUD $10,000.

EXAMPLE

Steve needs a new hoodie. His favourite store offers discounted prices for payments made in cryptocurrency. Steve pays $120 to acquire cryptocurrency and uses the cryptocurrency to pay for the hoodie on the same day. Under the circumstances in which Steve acquired and used the crypto, the cryptocurrency is a personal use asset, and thus does not attract capital gains tax.

TAX FREE

Business and trader taxes

Buying and selling crypto as a business

If you are a trader and you hold crypto for sale or exchange in the ordinary course of your business the trading stock rules apply, and not the CGT rules. This means the crypto you buy and sell is viewed as stock - as in, stock take.

Profit from the sale of cryptocurrency held as trading stock in a business is ordinary income. The cost of acquiring cryptocurrency held as trading stock is deductible as a business tax deduction.

Examples of businesses that involve cryptocurrency include cryptocurrency trading businesses, cryptocurrency mining businesses, cryptocurrency exchange businesses (including ATMs).

EXAMPLE

Jake runs a crypto trading business. On 15 November 2017, he buys 1,500 bitcoin for $150,000. On the same day, he sells 1,000 bitcoin for $200,000. As Jake holds the cryptocurrency for sale or exchange in the ordinary course of his business, Jake can claim a deduction for $150,000 for the acquisition of his bitcoin and declares income of $200,000 for the later sale of his bitcoin.

INCOME TAX

DAO taxes

A recent trend in crypto is the growth of DAOs (Decentralized Autonomous Organization). They are effectively member-owned communities without central leadership. It’s an organizational structure that allows stakeholders to make governing decisions without the need for any kind of centralized authority. Instead of a small Board of Directors making decisions about the company, DAOs enable the community of token holders (members) to vote on the future of the organization.

A good example of this is Uniswap. Holders of UNI tokens vote on issues relating to the protocol - for example, how transaction fees are used and what new features to add.

Members of a DAO can profit from the DAO in various ways. For example, they might receive a share of the profits which result from the activities of the DAO or they might sell their DAO tokens to investors. 

The ATO has no specific guidance on the taxation of DAOs. However, given the DAO is not a registered entity in any jurisdiction and has no central control, it cannot pay taxes itself. It’s therefore most akin to a flow-through entity - such as Australian Incorporated Limited Partnership (ILP) - which is a business entity that passes any income it makes straight to its owners. Under this interpretation, any income passed on to the members of the DAO would likely be subject to Income Tax, and sale of DAO tokens which have appreciated since acquiring them would be subject to capital gains taxes.

What crypto records will the ATO want?

The ATO requires you to¬†keep detailed records of cryptocurrency transactions¬†for¬†5 years¬†after you 'prepared or obtained the records', or ‚Äúcompleted the transactions or acts those records relate to‚ÄĚ, whichever is later.

The ATO recommends using an Australian tax-compliant app like Koinly for record keeping.

"You can use an accountant or third-party software to help meet your record-keeping obligations and working out your tax."

Crypto records for the ATO

How to report your crypto taxes

The ATO wants to know about your crypto activity in terms of income and capital gains. You'll need to declare both in your Annual Tax Return, in the same way you need to report your regular income, gains and losses.

When to report your crypto taxes

The Australian tax year runs from July 1 - June 30 the following year. If you are lodging your own tax return for July 1, 2021 ‚Äď June 30, 2022, the tax deadline is the October 31, 2022. Lodging through an accountant? You have until March 31 2023 to file.

Crypto cost basis method Australia

As an investor you can use either FIFO, HIFO or LIFO to calculate capital gains, as long as you can individually identify your cryptocurrency assets.

Australian cost basis method

As a trader, the ATO requires you to use FIFO when calculating your crypto Income Tax. Trader's work under income tax for business rules, not capital gains. This means your cryptocurrency is your trading stock, and you need to follow the rules for valuing trading stock.

When Koinly calculates your crypto taxes for you it will use FIFO as a default - but you can change your cost basis method to other ATO-approved methods in settings.

How to calculate your crypto taxes with Koinly

Don't get stuck in the busywork. Don't get it wrong. Don't rely on your accountant to know where to look. Use Koinly to generate crypto tax reports. Here's how easy it is:

  1. Sign up for a FREE account.
  2. Select your base country (Australia) and currency (AUD).
  3. Connect Koinly to your wallets and exchanges. Koinly integrates with Binance, CoinSpot, CoinJar, Kraken, Swyftx, and 300+ more. (See all)
  4. Let Koinly crunch the numbers. Make a coffee.
  5. Ta-da! Your data is collected and your full tax report is generated! See a sample report for Australian tax payers.
  6. To download your crypto tax report, upgrade to a paid plan from $49 per year.
  7. Send your report to your accountant, or complete your ATO submission yourself using the figures from your Koinly report.

How to file your crypto taxes

Whether you're filing with MyTax or with paper forms, we've got you covered.

How to file crypto taxes with myTax

Once you, or your accountant have calculated your crypto tax totals, the easiest way to file your taxes in Australia is online using myTax, available from your myGov dashboard.

See our step by step instructions on how to file crypto taxes with myTax.

How to file crypto taxes with paper forms

You also have the option of declaring your crypto activity on paper and returning the forms by mail. You'll need 2 forms, one for income, and one for capital gains.

Crypto income is declared on question 2 of Tax return for individuals 2021 (NAT 2541).

Question 2 relates to income other than ordinary salary or wages

Crypto Capital Gains: You'll need to select YES on question 1 of the Taxpayer's Declaration on your Tax return for individuals 2021 form (the form used for income tax).

Tick Yes if you traded Crypto in the past tax year

Next, complete question 18 of the Individual tax return instructions supplement 2021 Tax return for individuals (supplementary section) 2021 (NAT 2679).

  1. If you made a¬†gain: Report the total amount under the 18H ‚ÄėCurrent year capital gains‚Äô label on your tax return.¬†
  2. If you made a loss: Enter your total capital loss in the 18V ‚ÄėNET capital losses carried forward to later income years‚Äô label.
  3. This final amount is reported at the 18A ‚ÄėNET capital gain‚Äô label
  4. If your total gains, or losses are greater than $10,0000 you should complete Capital gains Tax (CGT) schedule.

Crypto gains and losses are detailed on a supplementary form, at question 18.

Who can help you calculate your crypto tax?

Crypto tax reporting is fairly new, and a road less travelled for most accountants. That doesn't mean the ATO is going to cut you any slack. Here are 3 ways you can tackle your crypto taxes and keep in the taxman's good books. We'll start with the easiest and most accurate method first.

  1. Use crypto tax software like Koinly to create a crypto tax report of crypto activity, in a template that fits your country's tax regulations. Send the report to your accountant to complete your tax return for you. This is a smart move especially if you have DeFi earnings to consider.
  2. Use a crypto tax calculator like Koinly to create a crypto tax report of crypto activity. Add the necessary data from your Koinly crypto tax report to your tax return and file it yourself online with myTax.
  3. Get your accountant to work out your crypto activity by supplying transaction histories, statements and potentially historic cryptocurrency-to-AUD conversions. Let them work it out and the file for you. Be warned - this will be a lengthy and expensive exercise.

How to avoid tax on cryptocurrency in Australia

Want to avoid tax on crypto? Well, you can't swerve your tax obligations entirely - but there are quite a few ways you can optimize your tax position before the end of the financial year to pay less tax overall.

Deducting Cryptocurrency Losses & Trading Fees

The first step towards minimising your tax liability is figuring out what losses and expenses you can offset against your taxable income. In order to do this, you first need to figure out whether you will be classified as someone who holds crypto as an investment or whether you're carrying on a crypto trading business.

Crypto trading or cryptocurrency used in business

If you're running a crypto business - be it mining, trading or exchanging, you can claim a tax deduction for most expenses from carrying on your business, as long as they are directly related to earning your assessable income. Provided that you pass the ATO's non-commercial losses rules - which means that you're running a legitimate business.

If you hold cryptocurrency for sale or exchange in the ordinary course of your business the trading stock rules apply, and not the CGT rules. Gains from the sale of cryptocurrency held as trading stock in a business are ordinary income, and the cost of acquiring cryptocurrency held as trading stock is deductible.

Also, keep in mind that the crypto you own at the end of the year is your trading stock and you have to declare its value as part of your assessable income. Check out 'simplified trading stock rules' if your turnover is under $10 million. Interestingly, you can declare the value of your crypto stock at either cost, market or replacement value, which gives you some flexibility in terms of tax planning.

Buying crypto only to pay for something else / Personal use asset

You can get an exemption from capital gains tax if you hold cryptocurrency as a personal use asset. If you purchase no more than AU$10000 of cryptocurrency to directly buy something else with crypto, that too over a short time period, you're eligible for this exemption.

When the crypto is acquired and held for some time before any such transactions are made, or if only a small portion of the crypto is used to make some transactions, it's unlikely that the crypto is a personal use asset. A cryptocurrency is unlikely to be a personal use asset in the following situations:

  • When you have to exchange the crypto to Australian dollars or some other cryptocurrency to purchase the items for personal consumption, or
  • If you have to use a payment gateway or other payment intermediary to acquire the items on your behalf (as opposed to using crypto directly)

The time of disposal of the crypto is the key to working out if it's a personal use asset. The longer the crypto is held, it's unlikely to be a personal use asset ‚ÄĒ even if you ultimately use it to purchase items for personal consumption. This is because you have likely benefited from an increase in the value of the crypto during the holding period.

So use this provision with care. If you end up getting investigated by the ATO, the burden of proof is on you to show that the crypto was, in fact, a personal use asset. Also, all capital losses you make on personal use assets cannot be written off against capital gains at any point.

Deducting cryptocurrency mining expenses

This depends on whether you undertake mining as a business or a hobby; this can be done by looking through the Are-you-in-business section on the ATO website.

Australian Bitcoin ETFs

On 27 April 2022, a Bitcoin exchange traded fund (ETF) launched, which can be a tax efficient way to gain exposure to Bitcoin. ETFs track the price of Bitcoin and are aimed at individuals who wish to invest in Bitcoin without having to deal with the security and technical aspects of self custody. 

Many Bitcoin ETFs pay their investors in the form of dividend distributions so if the newly created Australian ETFs emulate this strategy, then Australian ETF investors can gain tax advantages in the form of franking credits.

Franking credits arise for shareholders when certain Australian-resident companies pay income tax on their taxable income and distribute their after-tax profits by way of franked dividends. These franked dividends have franking credits attached.

If an Australian company tax is already paid by the companies within an ETF, then investors don’t need to pay those taxes again at the personal level. The corporate taxes paid are passed down to the Australian investor through franking credits. These franking credits can then be used to reduce an investor’s total tax liability.

Hold onto an asset for more than 12 months

As mentioned above, you are entitled to a 50% discount on your capital gains taxes if you hold an asset for more than 12 months. So before disposing of an asset, it could pay to check how long you have held it for - if it’s close to the 12 month threshold, you could save a lot of tax by simply holding off the sale until 12 months has passed. 

Offsetting your capital gain with capital losses

Capital gains from current or prior years can be used to reduce a capital gain and therefore the amount of CGT you need to pay. So always remember to report your losses - just because you don’t have tax to pay doesn’t mean you should ignore reporting these - these losses can help you in future. 

Donate your crypto to charity

You can claim an income tax deduction for gifts or donations of crypto to organisations that have the status of deductible gift recipients (DGRs). You can check the DGR status of an organisation at ABN Look-up: Deductible gift recipients

The deduction you are entitled to is equal to the market value of the crypto at the time of the donation. You will also not have to pay any capital gains taxes as a donation to a DGR is not considered to be a taxable event. 

Koinly Plan

The cost of your Koinly plan can be listed as a business expense. This would go under 'other expenses'.

Watch out for warning letters

28 May 2021: The ATO issued a reminder to Australian crypto investors to report all gains on their tax return. Approximately 100,000 taxpayers will receive a warning letter outlining their obligations and asking them to review their previously lodged returns. A further 300,000 people are expected to be prompted by pop-ups, as they lodge their 2021 tax return on myTAX.

To determine tax liability, the ATO is collecting data from crypto exchanges and comparing it to amounts entered on previous tax returns.

Failure to declare crypto gains can attract a penalty of 75% of the outstanding tax liability, plus the tax itself and interest on the shortfall. Read the full press release here.

It's highly likely many investors will receive the same warning letters in 2022.

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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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