6 burning Australian crypto tax questions answered
Want straightforward answers about how your crypto wins and losses will be taxed? We've got you.
We know tax isn't everyone's cup of tea. It's a subject that is convoluted at the best of times, let alone when you throw cryptocurrency into the mix. So we're going to get right to the point.
The team at Swyftx Cryptocurrency Exchange passed on the tax questions most commonly asked by Australian users, and we took them to two industry experts to get clear, concise answers.
First up, Mark Chapman. He's the director of tax communications at H&R Block and has more qualifications than you can shake a stick at, including a Master's of Tax Law from the University of New South Wales.
Next, Brenton Tong. Consistently ranked as one of Sydney's top financial planners, Tong is the managing director of Financial Spectrum and specialises in tax minimisation.
Here's what they had to say about your big tax questions.
Can I claim a tax deduction on crypto purchase and sales fees?
Yes, but deduction works differently depending on the type of investor you are.
"If you're a 'regular' investor, i.e. buy and hold, the purchase costs are counted as part of the capital gain," said Brenton Tong.
"So the fees to buy are added to your buy price and the fees to sell are taken away from your sale proceeds so you only pay tax on the net amount."
On the other hand, if you're a trader who trades crypto for a living, then the fees you pay to the exchange are considered trading costs, and can be offset against your income.
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I've been trading on decentralised exchanges, do I need to report these transactions or only the ones on Australian exchanges?
Yes. You need to report all profits and losses.
"If you're an Australian tax resident, you need to report all cryptocurrency transactions, wherever in the world they happen," said Mark Chapman.
"The ATO is only receiving third-party data from Australian exchanges for data-matching purposes, but a tax liability nonetheless arises on non-Australian transactions."
When is the cut-off for when I have to submit my tax for my crypto holdings for the previous financial year?
31 October 2021 for self-lodgers and 15 May 2022 for people who use a tax agent.
"Your tax return for the year that ended 30 June 2021 is due at the latest by 31 October 2021 for self-lodgers and 15 May 2022 for people who use a tax agent," said Chapman.
"You need to report all sales of cryptocurrency in the year to 30 June in this year's return."
Which method is best to use to work out my tax for all my crypto transactions?
Australian exchanges are an easy and popular way to deal with crypto and tax.
"They are best equipped to provide data that will help with lodging a return," said Tong.
If your exchange doesn't provide meaningful tax data, Tong suggests that a simple spreadsheet may be sufficient for people who have only made a handful of transactions. However, that probably won't be feasible for more frequent traders.
"If you're making regular trades, an online portfolio and tax tracking service will take the pain out of keeping on top of your taxes," said Tong. "Look for a service that allows for data integration with your exchange so you don't need to double enter your information."
For example, crypto exchange Swyftx lets its members generate full, downloadable tax reports across any time frame.
Do my capital gains stack across assets? For example, cryptocurrency and shares?
Yes. The ATO treats crypto like any other asset.
"Your capital gains include all profits on all your capital assets, including shares, property and cryptocurrency - assuming you've determined you're classified as an investor as opposed to a trader, in which case you have business profits," said Chapman.
"If you've made a loss on one asset, it can offset the profits on the others. If, after offsetting your losses against other current-year capital gains, you still have losses, they are carried forward to future years and offset against the first available capital gains."
Is there a minimum amount I have to make before I report my profits?
No. All profits and losses must be reported to the ATO.
"The ATO usually likes to take its share of every dollar that you earn," said Tong.
"Keep in mind that the ATO may already be aware that you have transacted on crypto, but it may not be aware of the profit – so failure to disclose even a small (or nil) profit may flag with the ATO that you're withholding information from them."
What if I didn't lodge a tax return for previous years of crypto trading?
Don't panic – speak to your tax agent as soon as possible.
"If you voluntarily disclose an error in a previous year's return, the ATO will often remit penalties," said Chapman.
"If you wait until the ATO discovers the error themselves, you could be looking at between 25% and 95% penalties, plus the original tax, plus interest." Ouch.
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