Author: Wendy Waack, Partner, TAG Financial Services
If you have purchased crypto-currency, it is important to be aware of the tax implications of this type of investment.
In Australia, crypto-currency is considered to be an asset by the ATO, specifically a digital asset. The ATO estimates that there are over 600,000 taxpayers currently invested in crypto-currency. The ATO is concerned that many of these investors consider their investment to be tax free. Under the current tax laws, crypto-currency is treated the same as other investments such as shares.
Capital Gains Tax
A capital gains tax (CGT) event occurs when you dispose of your crypto-currency, for example, when you sell or give away your crypto-currency or use it to obtain goods or services, trade and exchange for another crypto-currency, or convert crypto-currency to a currency, such as Australian dollars (AUD).
If you have a net capital loss from investing in crypto-currency, you can use it to reduce any future capital gains. A capital loss can be claimed if you lose your crypto-currency private key or the crypto-currency is stolen.
CGT also applies to the sell off of your non-fungible tokens (NFT).
It is important to keep an accurate record of the following:
- Amount of crypto-currency transactions in AUD
- Time and date of transaction
- What the transactions were for
- Who the transactions were for
You should also consider keeping a record of:
- Receipts of purchase or transfer of crypto-currency
- Exchange records
- Records of agent, accountant and legal costs
- Digital wallet records and keys
- Software costs related to managing your tax affairs
This can be done via crypto accounting software or a simple spreadsheet. Doing so will make it easier to meet your tax obligations.
A good resource is the ATO page Transacting with cryptocurrency.
If you have any questions on this, please contact your TAG advisor for further information on 03 9886 0800 or via email.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2021. Please do not reproduce without the expressed written consent of the author.