A Complete Guide to How Crypto Tax in Australia Works

Cryptocurrencies and crypto assets are a class of digital assets. These assets use cryptographic techniques for digital security along with distributed ledger technology to record transactions permanently. 

May 18, 2024

A Complete Guide to How Crypto Tax in Australia Works

Blockchain is expanding every day, and therefore, cryptocurrencies now interest many people in business and trading. If you are trading or investing in cryptocurrency in Australia, you might wonder if you need to pay crypto tax. 

Well, yes, you are obliged to pay the tax; however, it may depend on many factors. You might be new to crypto taxes, so to help you with the crypto tax calculator use and other information, we are here to help. 

In this article, we will learn about the tax on cryptocurrency in Australia. So, when you require tax services in Australia, you can discuss the real concerns with your accountant. 

How Do Cryptocurrencies Work?

Cryptocurrencies and crypto assets are a class of digital assets. These assets use cryptographic techniques for digital security along with distributed ledger technology to record transactions permanently. 

These assets can be found on a blockchain (digital ledger to record transactions and their specifics). Among many blockchains, the most popular ones are Ethereum and Bitcoin. New ones are also entering the market with time.

How Does Tax on Cryptocurrency Work?

Whenever a person sells assets such as cryptocurrency, they need to calculate capital loss or capital gain. If you calculate it, you will determine the capital gains tax you are bound to pay. However, if you are a frequent investor and running a business, it will be business income instead of capital gains. Therefore, it will be taxed as an income. It is recommended to consult an accountant for it.

Any basic crypto tax calculator will use a simple formula to perform this calculation. It will simply deduct the cost base of the cryptocurrency you are disposing of (the amount you spent in AUD to acquire it in the first place, plus any transaction costs) from the cryptocurrency's sale price (also in AUD). This will result in either a capital gain or loss. 

Capital Gain/Capital Loss = Purchase Price - Sell Price - Fees

If you have many sales, you may be able to add up the gains and losses to calculate an overall net capital gain or loss.

When you sell the asset, this sum is added to your ordinary assessable income (instead of being paid as a separate tax). The amount of tax you have to pay will depend on your marginal tax rate for that particular year.

One key fact to remember is that if you are an individual or trust and hold your asset (in this case, cryptocurrencies) for more than 12 months before selling it, you can receive a 50% capital gains tax discount.

But wait, how much is crypto taxed in Australia?

Well, it depends on the income bracket of a person, and as we discussed, it also varies according to the duration of holding it. But yes, they can range from 0-45%

Can The ATO Track Your Crypto?

Yes! Crypto is all about transparency. Therefore, there are databases to store crypto information dating back to 2014. 

If you have an account in an Australian exchange or are using an Australian wallet for crypto, the government can be aware of your crypto investments and tradings. 

Moreover, the government also uses the data-monitoring program to work with Australian exchanges. 

How is Crypto Tracked?

As for the AUD currency, multiple banks hold multiple records against each person. However, cryptocurrency is tracked through blockchain (the digital ledger of cryptocurrency). It has the data of all the crypto transactions recorded. Moreover, this ledge is decentralised, which means no one controls it. 

No government, no company, or no bank has control over it. It forms multiple digital copy stores all around the world, and each copy holds the same information. So, because blockchain is decentralised, it is still not a secret. 

Understanding Crypto Tax Laws Australia

Now, for the taxes, you need to know your position in crypto before you think of proper compliance with Australian crypto tax laws. So, ask yourself: 

Am I an Investor or Trader?

So, who are you as per the rules of ATO? Investor or trader in crypto? Or do you have an exchange? 

  • Investor

An investor is a person who sells and buys cryptocurrencies for personal investments. In this case, their revenue comes from long-term capital gains, staking, forks, and airdrops. Most people are known to be crypto investors, and their transactions are subject to the capital gains tax (CGT). 

  • Trader

You are a trader if you are running a business (such as an exchange) to earn income by buying and selling cryptocurrency. Traders treat their profits as company revenue rather than capital gains.

Becoming a trader requires more than just frequency or number of trades. It necessitates acts on your part that suggest, either directly or implicitly, that you regard your trade as a company, as well as an evaluation by the ATO to that effect. 

How is Crypto Taxed in Australia?

Remember that Income taxes apply to cryptocurrencies earned. Whether you earn them through work, mining, staking, or other means, income tax is applicable. However, your income is determined based on the fair market value of your cryptocurrency at the time of receipt.

As for cryptocurrency taxation in Australia, let’s be clearer about tax returns first.

When you work in crypto, the term “dispose” is used. Dispose refers to selling, gifting, trading, exchanging, converting, or using cryptocurrency to purchase something. For example, a person who is exchanging Bitcoin for another cryptocurrency or NFT or any cash or asset means he/she is disposing of some cryptocurrency. 

The ATO classifies cryptocurrencies as a "capital gains tax (CGT) asset." This implies you must report the transactions (on your tax return) for any time you traded, sold, or used cryptocurrency.

The ATO does not regard cryptocurrency as money and does not classify it as a foreign currency. Instead, they classify cryptocurrency as property; therefore, it is considered an asset for capital gains tax purposes.

Bottom Line

Are you still wondering how much tax I pay on crypto in Australia? You don’t have to, as your accountant at Ashmans Accounting can help you with that. 

With expertise in managing crypto for other clients, we bring you the crypto tax calculations according to Australian tax regulations. 

All you need is for us to offer you the right tax services in Adelaide, and you can finally be less worried about taxes and more focused on your business or work.