Cryptocurrency (aka crypto) is digital currency that involves transactions that are verified, and their records maintained by a decentralised system.
You might have heard about or even used or utilise cryptocurrencies like Bitcoin, which provide an added outlet for personal wealth.
There’s been a dramatic increase of cryptocurrency trading since the beginning of 2020, and an estimated 600,000 of Australian taxpayers have invested in cryptocurrency within recent years according to ATO data.
So, how is cryptocurrency taxed? Is it even taxable at all within Australia?
Interested in unearthing the common misconceptions of crypto tax?
Read more from Crest Accountant’s in-house crypto tax accountant.
Myth #1: Cryptocurrency transactions aren’t taxable
The Australian Taxation Office (ATO) recognises cryptocurrencies as digital assets.
This means they’re subject to the same capital gains tax rules that shares fall into.
You can talk to our very own, in-house crypto guru accountant Justin Fahey by contacting Crest Accountants.
Myth #2: Tax is only payable when withdrawing your money back into AUD
There’s a misconception circulating that have people believing that no tax is paid until you eventually sell your cryptocurrency back for Australian dollars.
Why is this incorrect?
As stated above, cryptocurrencies are considered digital assets, which means any crypto to crypto transaction is a taxable event.
Myth #3: Cryptocurrencies under $10,000 aren’t taxable
Okay, so cryptocurrencies are taxable, but not if they’re under $10,000, right?
Unfortunately, this is also false.
Misinterpretation of the $10,000 personal use asset rule, allowing some capital gains and losses that arise from the disposal of a cryptocurrency to be disregarded, is to blame.
This rule only applies in rare situations because the ATO regards cryptocurrency as a non-personal use asset if:
- It’s kept as an investment,
- As part of a profit-making scheme, or
- In the course of supporting a business.
What does this mean?
It means that the $10,000 personal use asset can only be utilised when cryptocurrency is purchased and immediately sold for a personal item.
Myth #4: Cryptocurrency trading cannot be tracked by the ATO
Australian-based cryptocurrency exchanges must comply with anti-money laundering laws, which means data on these exchanges are sent to the ATO.
While you can always move your cryptocurrency from these platforms to international platforms or personal wallets, the ATO will still have a record that you have invested in cryptocurrency.
Gain clarity with Crest Accountants
What we can learn from cryptocurrency and tax obligations is to treat the gains similarly to how you would your shares. Keep accurate records which include the date of transactions, what the transactions were made for, who they were made to and the dates of transactions.
The Gold Coast accounting team at Crest Accountants are here to help you understand, meet and maintain your tax obligations.
We’re here to assist individuals and businesses with tax returns and keeping up to date with the latest updates and strategies pertaining to accounting.
Contact Crest Accountants today for straightforward and efficient business and personal tax return advice and services on the Gold Coast.
Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice.