Tax Season is Around the Corner - 6 Tips for Crypto Users

So, Tax time is just around the corner and it is this time of the year that really starts to confuse me a little when it comes to cryptocurrency trading and tax implications in Australia.

To try and clear things up a little, here are 6 tips that might be timely at this time of the year.

1. Work out your liability
   Know your losses and gains. If you have made a gain and also want to sell some coins at a loss, do it during the same financial year to offset your liability.

2. Plan your tax payment
   If you have sold crypto and made a profit, then plan how you are going to pay your tax debt. You can wait until the last minute to pay your tax debt by selling some Bitcoin during October.

3. Understand your taxable events
   Crypto to crypto trades are taxable events according to the ATO. The ATO views cryptocurrencies as assets and like the sale of any asset, even if through an exchange .You may be in a position where you have made a profit on crypto to crypto trades and then have to sell coins to pay tax.

4. Know your exchange position
   Holding crypto on a foreign exchange doesn’t stop the ATO applying tax to trades on these exchanges. Australian residents for tax purposes are taxed on their world-wide income including any crypto trades.

1. Figure out your buying status
   There is a difference between a 'trader' and ‘investor’ when it comes to tax implications. Traders will be taxed on all income, whereas investors may be able to access the capital gains tax discount for holding a coin for more than twelve months.

2. Ensure your records are up to date
   Ensure your record keeping is up to date. One of the best tracking software options I have seen is www.cointracking.info to track your transactions. You will need to substantiate your trades, etc. to the ATO if they come knocking!

Lots of advice and implications for traders and investors in the cryptocurrency sphere. There is also a clause for 'hobbyist' traders that is a bit of a grey area with anything under $10,000 per year considered a 'hobby'. But to be completely sure, you would need to check the exact tax rulings to be sure.

Thanks for reading!

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