Cryptocurrency and Tax in Australia – Change on the Horizon?
A growing number of Australians have either invested in cryptocurrency or are seriously considering such an investment. It seems a regular occurrence that one of our friends or family tell us about their investment, and how cryptocurrency is the next big thing, and that we’d be stupid not to jump on the bandwagon. Whether that is true or not is really a matter of personal opinion, and in reality, cryptocurrency shares many similarities to other investments out there in terms of uncertainty of returns.
What many people may not have considered is how our investments in cryptocurrency impact our tax returns, and what exactly is cryptocurrency from a tax viewpoint?
Cryptocurrency, for the casual trader, is what we call a Capital Gains Tax or ‘CGT Asset’. The basic premise being the imposition of tax on any gain made, being the difference between what we sell it for (the capital proceeds) and what we purchased it for (the cost base). In this way, cryptocurrency is similar to shares in a company, for example.
You might be wondering ‘well how will the ATO know I’ve sold my Crytpo and made a fortune’? Well, the ATO can access information from all bitcoin trading platforms, so any significant gains, losses or trades are accessible to the ATO and using data matching technology, the ATO can easily pick up if you haven’t declared your gains on any trades made in your tax return.
Whilst this is the current state of affairs so far as the ATO is concerned, a recent court case has suggested that potentially, bitcoin should not be considered a CGT asset, and be more akin to ‘money’ and therefore not subject to tax of any kind. Of course, the ATO will appeal this case all the way to the high court, which will likely take years to decide, so in the meantime just be aware that the tax office knows about your Crypto, so be a good tax citizen and declare it on your return. Do watch this space though! If any of you have paid capital gains tax on bitcoin trades, you could be entitled to a refund if the above case is successful.
