Navigating Australia’s Taxation of Cryptocurrencies and Digital Assets

As you might expect, cryptocurrency and digital asset investments aren’t immune to tax just because they’re in a decentralised market – there are still a specific set of tax rules that the Australian Taxation Office (ATO) set that you’re going to need to understand if you want to trade legally in Australia.

Tax Treatment of Cryptocurrencies

Cryptocurrencies and digital assets are essentially treated as property in Australia, so the main tax you can expect here is capital gains tax (among a few other taxes that we’ll look at shortly) – here’s what the ATO has to say about a range of different crypto transactions and how they need to be reported and taxed:

Capital Gains Tax (CGT)

Capital gains or losses are essentially the difference between whatever the price of the crypto was when you bought it (plus any other associated costs) and when you sold it, and CGT will always apply whenever you either:

  • Sell it
  • Exchange it
  • Use it for any number of purchases

Calculating Capital Gains

Fortunately, it’s not so difficult to calculate the CGT when you need to, as you just need to determine what the crypto’s cost base was, as well as any sort of transaction fees – best part about this is that you might be eligible for a 50% CGT discount if you hold it for longer than 12 months, which is obviously pretty handing in reducing the overall taxable gain (and generally encourages you to hold your assets instead of recklessly day trading them on leverage).

Reporting Capital Gains

Then, you’re just going to need to report your capital gains or losses when you’re filing your annual tax returns by using the ATO’s CGT schedule – pretty simple stuff, but you’re still going to need to keep detailed records of all the transactions so that your reports are accurate.

Other Tax Considerations

There are a few other aspects of tax reporting you’re going to need to be aware of when trading cryptocurrency or digital assets: 

Personal Use Assets

You may actually be exempt from CGT with any crypto you’ve used for personal transactions so long as it was acquired and used quickly – you will have to pay CGT if you’re holding it for investment, though.

Mining and Staking

Any income from mining and staking is taxable, but you should be able to deduct expenses for electricity and hardware.

Airdrops and Forks

Any crypto or digital assets you receive via airdrops are forks as taxable as income upon receipt, and CGT applies upon disposal.

Record Keeping

Finally, it’s imperative that you’ve kept a detailed record of all your cryptocurrency transactions, including things like the dates, amounts, and purposes, for at least five years so that you’re able to comply with all the relevant ATO guidelines and potential audits.