Australian citizens and residents are required to pay Capital Gains Tax (CGT) on almost any crypto transaction. If you are wondering how to file crypto taxes in Australia, now is the time to get up to speed.
The good news is that the tax law is fairly straightforward, as long as you have a solid record of your crypto transactions. To be sure, it's a good idea to understand the tax law regarding crypto taxes in Australia.
The Australia Tax Office (ATO) takes crypto transactions as seriously as any other form of CGT. Failure to understand your tax obligations could create a lot of trouble in your life, as the ATO is completely capable of making your financial life miserable for years to come.
Let's have a look through the regulations that govern CGT in Australia so that you can figure out how to file your crypto taxes.
How to File Crypto Taxes in Australia: The Basics of CGT
The good news for crypto investors is that the ATO decided to apply the same rules to cryptos as it applies to any other kind of capital gain. Basically, if you sell the cryptos you bought within 12 months of their purchase, you are taxed on 100% of that gain. Wait more than 12 months, and that rate drops to 50%.
The ATO wants to know your total income for the year, and any trading activities will either add to or offset your overall income. It doesn't matter if you are trading in cryptos or on the ASX, you have to report any gains, and losses can actually help you.
Crypto capital gains taxes are included in your regular income, so any other money you make during a calendar year will be added with your capital gains, crypto profits included. It is very important to give the ATO all the information you have regarding your total income, as any omissions can lead to eye-watering penalties.
Let's Look at How it Works
For example, let's say you bought a BTC at A$4,000. The price of that BTC rose to A$6,000 a few months later, and you sold it. You would be liable for A$2,000 in gains. If you were able to wait more than 12 months to make the sale, the taxable income would fall to A$1,000.
Pretty simple, no?
You may have heard that anyone who invests less than A$10,000 in crypto isn't liable for CGT. This is somewhat misleading. Australian citizens and residents aren't liable for crypto transactions under A$10,000 if, and only if, the cryptos are used as part of a larger transaction.
So.. Do I Owe CGT on my Crypto Transactions?
The answer to that question is probably yes.
Unless you were buying cryptos to complete a transaction, you are going to have to file all your crypto transactions with the ATO. If you are a little confused, don't worry. The ATO made this easy.
Let's say you want to buy some totally legal goods from an online store, and the only way you can pay for them is with BTC. If you buy the needed amount of BTC, and then pay the seller directly (same day would be ideal) the CGT would not be applied to the transaction, as long as you keep these kinds of transactions under A$10,000 per year.
Pretty much any other crypto transaction will be subject to CGT, regardless of whether it is crypto-crypto or crypto-fiat. It is worth taking a deep-dive into how CGT works, and how capital losses can offset future CGT.
Any losses from crypto trading can also help you to offset capital gains in the coming year. Losses on any trading activity (including cryptos) can also help to boost your tax refund, so don't leave money on the table!
Crypto Taxes in Australia Have to be Paid Like Any Other Taxes
Crypto taxes should be included on your annual tax returns to the ATO, just like any other items that CGT can be applied to. If you need help with how to calculate the cost base of a crypto investment, talk to a tax professional.
The ATO isn't going to cut you any slack because you don't fully understand the tax code. In fact, if you fail to file and you owe money, you can get hit with a 75% penalty. You will still be liable for the taxes owed as well.
Make sure that you get all the trading record from any crypto exchanges you have been using, and it should be easy to calculate the amount of CGT you owe on your crypto transactions. The tax law is simple to understand, and crypto taxes are no different from any other form of CGT in Australia!
Good luck!
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About the author:
Nicholas Say grew up in Ann Arbor, Michigan with a father that read him the Wall St. Journal, though he always preferred picture books to charts and figures. He has traveled the world extensively, and been lucky enough to see how changes happen in real time. He currently lives in South East Asia, where he writes on a number of topics.
Sources:
https://medium.com/everycapital/how-not-to-do-your-crypto-tax-in-australia-35509499e021
https://www.ato.gov.au/General/Capital-gains-tax/
https://www.ato.gov.au/Individuals/Lodging-your-tax-return/
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