Cryptocurrency

It is vital to keep good records for all your transactions with cryptocurrency, whether you are using cryptocurrency as an investment, for personal use or in business.

Keeping good records will make it easier to calculate and meet your tax obligations, and if you are in business, they will assist you to manage your cash flow and see how your business is doing.

  • Person holding a Bitcoin coin and using a smartphone with cryptocurrency trading app, coffee cup in background.

    Investor

    Despite the name, and the fact you may regularly ‘trade’ cryptocurrencies, most Australians will fall under the Investor category. If your dealings with cryptocurrency predominantly involve using it as a personal investment, and the majority of your earnings are coming from long-term gains, you will likely fall under this Investor category.

    In this instance, gains and losses on cryptocurrency are subject to Capital Gains Tax, or CGT..

  • Trader

    Traders are businesses, including sole traders, that operate a business that involves cryptocurrency. To be classified as a trader, you must assess your facts and circumstances and consider how the Australian Taxation Office will view the activity.

  • Smartphone with purple screen displaying white cryptocurrency symbol

    1.

    Make sure you’re structured correctly from the beginning. Don’t delay on this.

  • Smartphone screen displaying a purple background with a white padlock icon, symbolizing security or privacy.

    2.

    Engage an accountant who specialises in cryptos. Security is number one priority.

  • Smartphone displaying a white wallet icon on a purple background.

    3.

    When transferring / sending money between wallets always do a small $$ test amount first.

  • Smartphone displaying a purple warning symbol with an exclamation mark inside a triangle on the screen.

    4.

    It’s a volatile market so make sure you understand what you’re doing & the risks.

Let's talk about Cryptocurrency

  • Cryptocurrency, sometimes called crypto-currency or crypto, is any form of currency that exists digitally or virtually and uses cryptography to secure transactions.

    Cryptocurrencies don't have a central issuing or regulating authority, instead using a decentralized system to record transactions and issue new units.

  • The ATO talks a lot about your intention.

    Understanding whether you’re an Investor or Trader is critical in relation to compliance purposes and tax for cryptocurrency in Australia.

    The short answer to this question is if you’re buying & selling coins regularly, you’re likely to be considered a Trader by the ATO.

    On the other hand, if you’re buying & holding for periods of time, and only sell from time to time at a profit, you’re likely to be considered an Investor by the ATO, and CGT will apply.

    Therefore, we recommend you keep accurate records if you sell a crypto coin at a profit.

  • Yes, you do.

    The ATO state you must keep records of all transactions and the onus is on you to ensure they’re accurate.

    That is, within crypto exchanges as well as bank account statements.

    The tax office regard all transactions as taxable in Australia with only a few exceptions.

  • It is absolutely CRITICAL. Here’s why…

    Once you’ve derived gains in cryptocurrencies, it’s too late to do much about it, especially if you haven’t organised to buy your crypto coins in a structure.

    For example, if you buy $10k BTC and it goes to $50k, you’ve made the profit. You pay ALL the tax in your own name. (Remember, individuals get taxed at the highest margin rate).

    Therefore, it’s crucial to set it up properly from the very beginning to make sure you keep more of your profits in your pocket.

  • Yes, you do.

    The ATO says if you turn BTC into an alt coin or cash it into fiat, you’ll pay tax on any gain.

    This is why once again it’s important to always keep clear and accurate records. Tracking your tax for cryptocurrency in Australia can be cumbersome but certainly worthwhile.

  • Yes, it is still possible to move your cryptocurrencies into a structure. However, tax will be paid on the transfer.

    The best thing to do if you’re in this position is to speak with an expert who can go through your cryptos, work out how much tax you will pay, and tell you which ones to move into a structure and which to keep in your own name for now.

  • Unfortunately, as a general rule, there isn’t a lot we can do if you’ve already derived the gain. However, there are sometimes things we can do.

    This is why it’s important to set it up right in the first place rather than leave it until it becomes a BIG problem.

    We like to use cases such as these to help clients prepare for the future, and understand if you anticipate large profits, it’s often best to “wear” some tax, get it set up right, and know in future, you will pay a lot less.

  • One way is to open up an exchange account in the name of a trust / structure.

    This is, however, difficult to do in practice. Plus, with a Trezor or Ledger wallet, it is physically held.

    We recommend people use a mixture of a service agreement and trust minute to correctly link the cryptos with the trust / structure.

  • 1. Make sure you’re structured correctly from the beginning. Don’t delay on this.

    2. Engage an accountant who specialises in cryptos.

    3. When transferring / sending money between wallets always do a small $$ test amount first.

    4. It’s a very volatile market so make sure you understand what you’re doing, and the risks involved.

    5. Watch out for security, phishing scams, etc.

    6. SECURITY is the number ONE priority.