How Cryptocurrency is Taxed in Australia
I. Capital Gains Tax
Capital Gains Tax (CGT) applies when cryptocurrency is sold or traded for a profit.
The profit is calculated as the selling price less the purchase price. 50% of the
capital gain is taxable at the individual's income tax rate.
CGT applies to all cryptocurrencies, including major coins like Bitcoin, Ethereum and
Litecoin. Any profit made from trading or selling these cryptocurrencies may be
subject to CGT. However, if the cryptocurrency is held for at least 12 months before
selling or trading, individuals may be eligible for the CGT discount which reduces the
taxable amount by 50%.
II. Goods and Services Tax (GST)
GST applies when cryptocurrency is used to buy goods and services in Australia.
GST is calculated based on the Australian dollar value of the cryptocurrency at the
time of the transaction. The business supplying the goods or services is responsible
for collecting and remitting the GST.
GST applies to the fair market value of the cryptocurrency in Australian dollars,
regardless of any gain or loss made. The Australian Taxation Office considers
cryptocurrency a form of intangible property. As such, transactions involving
cryptocurrency are treated the same as transactions involving other forms of
property.
III. Income Tax
Income Tax applies when cryptocurrency is received as payment for goods and
services. The Australian dollar value of the cryptocurrency received is assessable
income. Income tax is calculated based on the individual's income tax rate.
Any cryptocurrency received as payment for goods or services, such as mining or
staking rewards, is considered taxable income. The fair market value of the
cryptocurrency in Australian dollars at the time of receipt is used to determine
taxable income. Income tax must be paid on this amount.
IV. Record Keeping
Records of all cryptocurrency transactions must be maintained. Records include
date of transactions, number of cryptocurrency traded, and Australian dollar value.
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Records must be kept for at least 5 years from the date of the transaction.
Accurate record keeping is important to prove acquisition costs, sale proceeds and
dates of transactions. This information is required to calculate taxable capital gains
and ensure the correct amount of tax is paid. Failure to maintain proper records may
result in penalties from the Australian Taxation Office.
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