Practical tips, insights and articles to help you build the business, wealth, and lifestyle you want

Is Cryptocurrency subject to Tax?

Article By Adam Hurwood | | Accounting & Tax

 So you’ve just sold your cryptocurrencies and made your millions? Maybe that wasn’t you, don’t worry I missed the boat in making my millions too. But if you are looking to invest or are one of many that have invested in cryptocurrencies, here‘s a few things to know on the tax implications of it all.

While the ATO does not view cryptocurrency as being either money or foreign currency, they have set out some guidelines to make it clear that no profits from cryptocurrency trading will be left untaxed.

Using cryptocurrency for personal transactions

Cryptocurrency as a whole is regarded by the ATO as a purchase of an asset similar to say purchasing gold bullion. Which means trading of such currencies will be subject to Capital Gains Tax (CGT).

  • So, if you’ve held your currency for more than 12-months you may eligible to apply the 50% discount on your capital gains.
  • If your trading occurred within a 12-month period, you may liable to pay tax on all of the gain you’ve made on sale.
  • However, any capital gain made on the use of the currencies to purchase goods or services will be disregarded provided the cost of the currencies is $10,000 or less.

Using cryptocurrency for business transactions

On the other hand, if you are in the business of trading cryptocurrencies or using cryptocurrencies for trade, you will need to process the transactions in the same manner as you would with any other barter transactions. That is:

  • cryptocurrencies received in exchange for goods and services will be regarded as income and any cryptocurrencies paid in exchange for good and services will be regarded as an expense, with all transactions being recorded in Australian dollars.
  • Which means you may be liable to pay or make a claim on GST for providing or receiving goods or services in exchange for cryptocurrencies, respectively.
  • And any profit made on such transactions will be regarded as ordinary income and taxed accordingly.

Record keeping

This being a fairly new area of taxation, we expect that the ATO will look to refine the details of the tax treatments as they deal with more cases. So, when you do trade such currencies, please make sure to keep detail of the transactions, such as:

  • the date of the transactions
  • the amount in Australian dollars
  • what the transaction was for
  • details of the other party

If you are looking to invest or have already invested in cryptocurrencies and would like more info on the tax implications, please contact your altitude adviser.