Crypto and Its Tax Implications in Australia

If you’re looking to jump onto the cryptocurrency bandwagon, it’s essential to understand the various aspects of this new digital investment phenomenon, including its tax implications. Diversifying your portfolio and investing in digital assets can result in handsome rewards.

Cryptocurrency has opened a whole new world of investing. Countries across the globe are now recognizing the value of these digital assets and finding ways to accommodate them in their investment and tax structure. Investing in cryptocurrency is different from other forms of investing. The Australian Taxation Office (ATO) has applied existing legislation to help regulate cryptocurrency transactions.

It’s essential to work with professional accountants who can help you break down the various tax implications concerning cryptocurrencies. Having a foundational understanding of digital investments may help you make wiser decisions, and come tax time, you won’t stress out. Let’s have an in-depth look into the world of crypto and its tax implications.

Crypto CGT

Capital Gains Tax is the amount of tax you pay when you realize the sale of a capital asset. The gain/loss results from the difference between the price you paid to purchase your crypto asset minus the price you received when you sold the asset. When talking about cryptocurrency, many transactions can give rise to a CGT event where you’d need to pay tax to the ATO. Consult an experienced tax advisor who can help you determine the amount of tax you need to pay to the government.

Capital Losses

If you’ve experienced a capital loss during your crypto transactions, you can use that to offset your capital gains in current or future financial years. However, you can’t use the loss to offset the gains from your previous financial year. You can also consider doing a cross-asset offset. If you’ve experienced a capital loss from crypto, you can offset that against the capital gain you’ve gained from the disposal of your stocks in the same year.

Calculating Your Crypto Tax

It can be hard to determine the amount of tax you need to pay to the ATO if you’ve invested in multiple assets, including crypto. It’s always helpful to consult a tax advisor who is well-versed in complicated tax matters to help you calculate the amount of tax you owe to the government. Tax structures can become more complicated if you operate as a business and buy crypto under a business banner.

Similar to other CGT assets, if you hold onto your cryptocurrency at least for 12 months, you may be eligible for the 50% CGT discount.

When exchanging any cryptocurrency for one another, a taxable event may still occur. The ATO will deem that the capital gain will be assessed as the value of the cryptocurrency you receive in exchange for the offering of your cryptocurrency held prior to the exchange less any amounts paid to acquire the original cryptocurrency.

The ATO has a data matching program with 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.

It’s worth hiring the services of an expert tax planner who can help you accurately calculate your tax returns. They can also help you find legal ways to reduce your tax bill, as the last thing you’d want is to pay a good chunk of money in tax payments. If you’re looking for expert tax planners in NSW, check out the services provided by Ace Biz. We provide professional business consulting services in NSW and can help you with all your complex crypto and other financial and tax needs.

Our professionals are knowledgeable about different aspects and implications regarding crypto and other types of assets when it comes to tax. Our accounting and tax a services in NSW are one of the best, and we have established our reputation as one of the best tax accounting firms in NSW. If you need any help regarding your complicated tax issues, financial reporting, business advisory, BAS statements, CGTs and other matters, please don’t hesitate to call us.

We’ll be happy to provide quality services that help you in your complicated financial matters. We also provide free consultation! Contact us today!