If you've bought or sold cryptocurrency in the last financial year, it's vital that you understand your Australian crypto tax obligations.
You need to pay tax on Bitcoin and other cryptocurrencies in Australia, but how you're taxed can vary depending on the type of crypto transaction and your circumstances.
In this guide we look at the basics of cryptocurrency tax in Australia to help you learn what you need to do to keep the Australian Taxation Office (ATO) happy.
The following is a summary of some important details regarding how the ATO handles cryptocurrency at the time of writing (1 June 2023).
While the ATO's guidance on cryptocurrency has remained consistent for some time, it is still an evolving space, and rules and laws may change.
We're not tax experts, and general information such as that found in this guide is no substitute for professional advice. Consider your own situation and circumstances before relying on the information laid out here.
Do you have to pay tax on cryptocurrency in Australia?
In most cases, the answer is yes.
Despite its name, cryptocurrency is treated as an asset, rather than currency by the ATO.
This means you have to pay capital gains tax on any profits made when selling cryptocurrency. This is very similar to how stocks are treated for tax purposes.
The good news is that if you have held the same asset for over 12 months without trading it for another, then you may qualify for a 50% discount on your capital gain.
This is just one of a number of ways you may be able to reduce your cryptocurrency tax bill in Australia.
If you don't report your crypto gains or losses, you are at significant risk of being audited. The ATO has both an excellent data matching program and immense amounts of data on cryptocurrency activities. They receive data from most exchanges and could use 3rd party tools to link a public key to you.
Tax works differently if you're a crypto trader or investor
Your tax responsibilities vary depending on whether the ATO classifies you as a crypto investor or trader.
Most people who buy and sell crypto occasionally will fall into the investor category. This means you'll be taxed under capital gains tax (CGT) rules.
But if you buy and sell large quantities of crypto in a business-like manner, the ATO may deem you to be carrying on a crypto trading business. If that's the case, your earnings are classified as business income and subject to income tax.
It is important to keep proper records of all your crypto-related transactions – the ATO allows the use of software to help meet record-keeping obligations
If you're an investor, the tax office treats cryptocurrency as a capital gains tax (CGT) asset – just like shares and a range of other investments. You're not taxed when you buy crypto, but a CGT event occurs when you dispose of a cryptocurrency by:
Selling it for Australian dollars or stablecoins
Trading it for another cryptocurrency
Gifting it to someone else
Paying for goods or services
If you make a capital gain when you dispose of cryptocurrency, you'll need to pay capital gains tax.
For example, if you buy $4,000 worth of Bitcoin as an investment and then later sell it for $5,000, you'll need to pay tax on the resulting $1,000 gain.
However, if you hold your cryptocurrency for more than a year before selling or trading it, you may be entitled to a 50% CGT discount.
On the other hand, if the proceeds from the disposal of the cryptocurrency are less than what you paid to acquire it initially, you will experience a capital loss. Capital losses can be used to reduce capital gains made in later years, including investments outside of cryptocurrency.
There are exceptions where you may not be taxed, such as if you acquire cryptocurrency for personal use to immediately pay for goods and services instead of as an investment. But even if you don't have to pay tax on a particular transaction, you must keep records for all your crypto transactions.
Finally, be aware that cryptocurrency can also be subject to income tax. If you earn coins or tokens through staking, for example, or if you earn interest on a crypto savings account, this will need to be included as part of your assessable income.
As mentioned above, most people who take a buy-and-hold approach to cryptocurrency will be classed as investors by the ATO and taxed under CGT rules.
But if you actively trade crypto in a business-like manner with the aim of making a profit, you may be classed as a trader. For example, if you run a crypto trading business, mining business or exchange, your cryptocurrency earnings will be treated as business income.
Operating for commercial reasons and in a commercially viable way
Carrying on in a business-like manner
Marketing a business name or product
Intending to make a profit
If you're deemed to be carrying on a business, you'll be taxed under trading stock rules instead of CGT rules. This means your proceeds are assessed as income rather than capital gains, and you can claim the cost of acquiring cryptocurrency you hold as trading stock as a tax deduction.
For help working out whether you're an investor or a trader for crypto tax purposes, we recommend that you seek professional advice from a crypto tax specialist.
If you are carrying on a business, then crypto profits are generally taxable as ordinary income and not as a capital gain
Yes, the ATO knows about your crypto (and cares what you do with it!)
In a media release from May 2023, the ATO singled out capital gains from crypto assets as a priority this tax time.
"Don't fall into the trap of thinking we won't notice if you sell an asset for a gain and don't declare it" said assistant commissioner Tim Loh.
The ATO has had a cryptocurrency data-matching program in place since April 2019 and it can track data as far back as 2014.
This program allows the ATO to match its own records with crypto transaction data from exchanges to identify anyone who isn't meeting their Australian crypto tax obligations.
Last financial year Loh reminded taxpayers that "Through our data collection processes, we know that many Aussies are buying, selling or exchanging digital coins and assets so it's important people understand what this means for their tax obligations".
It is important to keep proper records of all your crypto-related transactions – the ATO allows the use of software to help meet record-keeping obligations
Working out your cryptocurrency capital gain (or loss)
You will make a capital gain if the proceeds from disposing of cryptocurrency exceed its cost base. The cost base is the purchase price you paid for the crypto plus brokerage fees and any other costs associated with buying and disposing of it.
To work out your capital gain or loss, you'll need to find out the value of the cryptocurrency in Australian dollars at the time of the transaction. The ATO says you can access this information through a reputable online exchange.
Capital gains can be calculated by subtracting the amount you paid for a cryptocurrency from the amount you sold it for. The resulting figure forms part of your assessable income and needs to be declared on your tax return.
If you purchased crypto directly with Australian dollars, or sold crypto for Australian dollars, it's easy to calculate purchase and sale prices – just remember to include brokerage fees in the total cost for each transaction.
However, if you purchased your crypto holdings using a widely traded digital currency like Bitcoin, you'll need to note down the Bitcoin price at the time of that trade.
There are also some services available to help simplify the record-keeping process. For example, Koinly and Crypto Tax Calculator are just some of the providers that offer accounting tools for crypto investors and traders that can be linked to your crypto exchange accounts to help you calculate capital gains. The ATO also offers a useful CGT record-keeping tool.
Michelle bought $1,000 of Bitcoin as an investment. 6 months later, she sold her Bitcoin for $4,000 – that's a capital gain of $3,000. The ATO classifies this $3,000 profit as a CGT event, so Michelle must include this capital gain amount as part of her assessable income on her tax return.
* This is a fictional, but realistic, example.
How much tax do you pay on cryptocurrency?
Capital gains tax isn't charged at a separate rate to income tax. Instead, any capital gains you make from crypto assets are taxed at the same rate as your income for the financial year.
So the amount of tax you pay on cryptocurrency in Australia depends on your individual income tax rate. Use the table below to determine the rate at which you'll be taxed. Of course, don't forget that a 50% CGT discount applies to investments that you've held for at least a year.
2021-22 Income tax rates for Australian residents
Taxable income
Tax you will pay on this income
$0 - $18,200
Nil
$18,201 - $45,000
19 cents for each $1 over $18,200
$45,001–$120,000
$5,092 plus 32.5 cents for each $1 over $45,000
$120,001 - $180,000
$29,467 plus 37 cents for each $1 over $120,000
$180,001 and over
$51,667 plus 45 cents for each $1 over $180,000
Learn more about crypto CGT from the team at Koinly
Can you avoid paying crypto tax in Australia?
You may be eligible for the personal use asset exemption. Cryptocurrency transactions are exempt from CGT if:
The crypto is used to purchase goods or services for personal use, such as booking hotels online or shopping at retailers that accept digital currency; and
The capital gains you make are from personal use assets acquired for less than $10,000.
But there are a few terms and conditions that apply. The ATO explains that cryptocurrency is not classed as a personal use asset if it is acquired, kept or used:
As an investment
As part of a profit-making scheme
In the course of business activities
The ATO also states that if you hold cryptocurrency for some time before using it to buy items for personal use, it's "less likely" to be classified as a personal use asset. In other words, the longer you hold your crypto before spending it, the smaller your chances of qualifying for the personal use asset exemption.
You also may not be able to take advantage of the exemption if you need to use a payment gateway or bill payment service to purchase the items on your behalf, so check the ATO's fine print carefully before deciding whether you can avoid CGT.
Peter wants to buy a new pair of noise-cancelling headphones from an online electronics retailer. The retailer offers a 20% discount for customers who pay with Bitcoin, so Peter buys $400 worth of Bitcoin from a crypto exchange and then uses it to buy the headphones the same day. In this situation, Peter's cryptocurrency is classed as a personal use asset and isn't subject to CGT.
Meanwhile, Peter's brother Paul has spent several months acquiring a number of popular cryptocurrencies. His plan is to sell them for a profit once they've increased in price, but after hearing about Peter's great deal on the headphones, Paul decides to use some of his crypto holdings to buy a pair of earbuds from the same retailer.
However, because Paul initially acquired that cryptocurrency as an investment, it's not classed as a personal use asset and is therefore subject to CGT.
* This is a fictional, but realistic, example.
What cryptocurrency tax records do you need to keep?
"It is important to keep proper records of all your crypto-related transactions – the ATO allows the use of software to help meet record-keeping obligations," explains Danny Talwar, Koinly's head of tax.
Records you should keep include:
The date of each transaction
The value of the cryptocurrency in Australian dollars at the time of the transaction
The purpose of the transaction
The details of the other party involved (even if it's just their crypto wallet address)
For example, if you want to claim the personal use exemption, you'll need to be able to prove that you used your cryptocurrency to buy an item or service for personal use.
The ATO outlines examples of the records you should keep, such as:
Receipts of cryptocurrency purchases or transfers
Exchange records
Records of agent, accountant and legal costs
Digital wallet records and keys
Software costs associated with the management of your tax affairs
There are also some services available to help simplify the record-keeping process. For example, CoinTracking is designed accounting tools for crypto investors and traders that can be linked to your crypto exchange accounts to help you calculate capital gains.
If you have not kept records of your tax, you can access historic price information from reputable websites that publish daily conversion rates for BTC/AUD, ETH/AUD etc. Your crypto exchange should also be able to provide you with details of your transaction history.
How tax works with these 5 crypto activities
It's quite possible for someone to place several crypto-to-crypto trades each year without ever using any fiat currency – for example, you might exchange some of your Bitcoin holdings for Ethereum tokens and several other altcoins, without ever converting any of your funds back to Australian dollars.
However, even though trading from crypto to crypto means that any gains you've made haven't actually been realised in fiat currency yet, CGT still applies. This means that when you trade one cryptocurrency for another, you'll need to keep a record of the value (in Australian dollars) of the cryptocurrency you receive.
With this in mind, you'll need to keep records of all your crypto trades so you can calculate any capital gains or losses and include them on your tax return. Software such as CoinTracking can help you track your trades and generate capital gains reports. It offers integration with many leading exchanges to make things even easier.
In cases where it's not possible to calculate the value of the cryptocurrency you received, the capital gain can be worked out by using the market value of the cryptocurrency you disposed of when the transaction occurred.
If you use a crypto-to-fiat debit card to spend your cryptocurrency in the real world, make sure you're aware of your tax obligations. The ATO treats crypto-to-fiat debit cards the same way it treats other cryptocurrency transactions – so when you convert crypto into Australian dollars to make a purchase, that's considered a CGT event.
In some cases, the personal use asset exemption may apply. But with the ATO stipulating that the longer you hold crypto, the less likely it is to be classified as a personal use asset, this exemption may only apply in rare circumstances.
With this in mind, take care to keep detailed records of all transactions on your crypto-to-fiat debit card. Also remember that if your crypto debit card offers a reward in the form of "cashback" crypto coins or tokens on each transaction, these will need to be included as part of your assessable income.
If you stake some of your crypto assets to participate in network consensus, any coins or tokens you receive as staking rewards will be taxed.
"Additional tokens generated from staking are taxed as ordinary income rather than as a capital gain," says Talwar. "The tax is calculated using the fiat (AUD) value of the staked tokens at the time they were received."
Rewards derived from networks that use different consensus mechanisms, such as proof of authority and proof of credit, are treated the same way. The same rule applies to interest earned through decentralised finance (DeFi) investments, so make sure to declare the value of any crypto interest you earn as assessable income.
It's also important to understand how crypto tax in Australia works if you receive coins or tokens as part of an airdrop. The ATO classifies airdropped coins or tokens as ordinary income, so you'll need to keep a record of their value at the time you receive them. And if you later sell them for Australian dollars or another cryptocurrency, this will be treated as a CGT event.
The ATO's treatment of NFTs is the same as its treatment of cryptocurrencies.
"For most casual investors or hobbyists, profits derived from NFT sales will be taxable as a capital gain," explains Talwar. "However, if you are carrying on a business, it is likely you will be taxed on income rather than as a capital gain. It is important to keep proper records of all NFT-related transactions when it comes to tax time."
If you buy an NFT as an investment, it will be treated as a CGT asset. A CGT event occurs if you sell the NFT, exchange it for another NFT, or gift it to someone.
If you hold the NFT for at least 12 months before disposing of it, you may be eligible for a 50% CGT discount. And just like cryptocurrency, an NFT can potentially be classed as a personal use asset.
However, the tax treatment of NFTs is different if the ATO decides that you buy and sell NFTs as part of carrying on a business. If that's the case, trading stock rules apply.
Hard forks such as the Bitcoin Cash hard fork in August 2017, when Bitcoin Cash (BCH) was distributed to Bitcoin holders on a 1:1 ratio, present a special situation. You will need to identify the original chain and the new fork to properly calculate your tax obligations.
According to the ATO, the tax treatment for crypto investors in this situation is as follows:
If you're holding a digital currency as an investment and you receive a new crypto due to a chain split, you will not be considered to have made a capital gain or earned any regular income. But if you decide to keep the new cryptocurrency as an investment, a CGT event will occur whenever you dispose of it.
How to minimise crypto tax in Australia (and make tax time easier)
There are several simple things you can do to gain a deeper understanding of your cryptocurrency tax obligations and to make sure you're fully compliant with all ATO regulations, including:
Hold for more than 12 months. If you're classed as a cryptocurrency investor, you'll be taxed on any capital gains resulting from your crypto transactions. However, if you hold your crypto for more than 12 months, you may be eligible for a 50% CGT discount.
Tax loss harvesting. Cryptocurrencies are notoriously volatile. If the value of some of the cryptocurrencies in your portfolio has plummeted and you sell them at a loss, you can use this to offset any capital gains for the year. This is a strategy known as tax loss harvesting and it can help you reduce your capital gains tax bill, so chat to a crypto tax expert to find out whether it's a viable approach for you.
Do your own research. Take a closer look at the ATO's guide to the taxation rules on cryptocurrencies for more information on how your crypto transactions will be taxed. You can also search for information or ask a question on the ATO Community forum.
Plan ahead. Consider your intentions as to how you will use cryptocurrency before you buy. For example, if you initially acquire Bitcoin for everyday personal purchases but later decide to hold it to make a long-term profit, make sure you're aware of the potential tax consequences.
Keep records. Keep track of your crypto transactions as you go. This will be much easier than searching for all the information you need come 30 June. Most exchanges will let you export a spreadsheet of your trades to help you keep track.
Think about deductions. Are you eligible to claim any deductions for expenses related to your crypto transactions, such as if you run a Bitcoin mining business?
Disclose, disclose, disclose. Don't assume that transactions made with Bitcoin and other cryptocurrencies are untraceable – they're not. And don't even think about "forgetting" to disclose the details of your crypto transactions, as the ATO is targeting crypto investors and has data-matching software in place to track transactions. The penalties for non-disclosure are severe.
However, the most important step you can take to better understand cryptocurrency tax is to talk to an expert.
Do I need an accountant for crypto tax?
Not only is Australian crypto tax complicated and confusing, it's also still evolving. While some people will have the knowledge to accurately report their crypto transactions themselves, many others – particularly those who have made substantial capital gains – will be better off getting help from an accountant or registered tax agent.
FAQs
Yes. If you buy Bitcoin as an investment, you will need to pay capital gains tax when you sell your Bitcoin for a profit. Likewise, if you incur a loss, you can use that to offset a capital gain you make in the future. If you hold your Bitcoin for 12 months before selling it, you may qualify for the 50% CGT discount on your capital gain.
Be in accordance with the fund's investment strategy
Comply with Superannuation Industry (Supervision) Act 1993 (SISA) and Superannuation Industry (Supervision) Regulations 1994 (SISR) regulatory requirements concerning investment restrictions
The ATO encourages SMSFs to seek independent professional advice first.
It's possible that you may have tax reporting obligations and also have to pay tax in the country where the exchange is located, as well as in Australia. Speak to a cryptocurrency tax specialist for advice tailored to your situation.
No. CGT only applies when you dispose of the cryptocurrency, such as if you sell it for Australian dollars or exchange it for another crypto. So if the value of your crypto investment portfolio goes up, you won't be taxed until you dispose of any of your holdings.
The value in Australian dollars of the cryptocurrency you receive will need to be included as part of your ordinary income. If your business buys items using cryptocurrency, you're eligible to claim a deduction based on the market value of the item acquired.
"This depends on whether you are deemed as a tax resident in the country which the exchange belongs to," says Koinly's head of tax, Danny Talwar. "Just because the crypto exchange is based overseas does not necessarily mean that an individual becomes a tax resident of that country. However, an Australian tax resident will generally pay tax in Australia on their worldwide income. Tax residency rules are complex and dependent on individual facts and circumstances – it is recommended that you seek professional taxation advice in the relevant jurisdictions."
"If you forget to declare any income from previous years, you are at risk of the ATO auditing you to correct your tax return. You can also voluntarily amend previous year tax returns though you should consult with a professional before doing this" says cryptocurrency tax expert and advisor, Harrison Dell.
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"If you forget to declare some losses in previous years, it may increase your risk of being audited by the ATO, but there are usually no penalties for not reporting a loss. However, if you forget to report a tax loss in a previous year it doesn't stop you for using it in a later year. This applies to both capital and income losses. It is much easier to use a prior year tax loss if you have reported it correctly, as it will ensure the your tax returns are consistent."
"Using a crypto debit card may trigger a capital gain or loss over a period of time depending on the crypto you spend. For example, if you held Bitcoin for many years and then loaded it onto a crypto debit card to spend, the spending triggers capital gains tax based on the difference between what you bought the Bitcoin for and the current spot price of Bitcoin. If you held the Bitcoin for a very short period, you may be able to claim it was a personal use asset, which is exempt from capital gains tax." says cryptocurrency tax expert and advisor, Harrison Dell.
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"Australians should be very careful about claiming crypto is a personal use asset as the ATO scrutinises this - especially if there are significant gains on those personal use assets."
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"If you forget to declare some losses in previous years, it may increase your risk of being audited by the ATO, but there are usually no penalties for not reporting a loss. However, if you forget to report a tax loss in a previous year it doesn't stop you for using it in a later year. This applies to both capital and income losses. It is much easier to use a prior year tax loss if you have reported it correctly, as it will ensure the your tax returns are consistent."
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"If you don't report your crypto gains or losses, you are at significant risk of being audited. The ATO has both an excellent data matching program and immense amounts of data on cryptocurrency activities. They receive data from most exchanges and could use 3rd party tools to link a public key to you." says cryptocurrency tax expert and advisor, Harrison Dell.
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"Lots of Australians think if you have less than $10,000 worth of crypto gains, there is no tax - this is not correct. There is no amount of crypto that is exempt from income tax or capital gains tax. The $10,000 number is likely from people assuming the personal use asset exemption applies based on it being less than $10,000, but really the exemption only applies based on how you use the crypto and is very restricted."
Disclaimer:
This information should not be interpreted as an endorsement of cryptocurrency or any specific provider,
service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and
involve significant risks – they are highly volatile and sensitive to secondary activity. Performance
is unpredictable and past performance is no guarantee of future performance. Consider your own
circumstances, and obtain your own advice, before relying on this information. You should also verify
the nature of any product or service (including its legal status and relevant regulatory requirements)
and consult the relevant Regulators' websites before making any decision. Finder, or the author, may
have holdings in the cryptocurrencies discussed.
James Edwards was the cryptocurrency editor at Finder. He led the editorial strategy and reported on the latest industry news to further Finder's mission of helping people make better financial decisions.
A relatively early adopter, James has been using Bitcoin since 2013 and began working in the industry in 2017. He takes pride in his ability to boil down complex topics into language his parents can understand.
His expertise has seen him called on to report at events such as TechCrunch Disrupt, CoinDesk Consensus and IBM Think, and he has coordinated a vast number of high-profile interviews with the industry's brightest minds.
He is a regular contributor to Nasdaq and is frequently called upon for market commentary in Australia and abroad.
A comprehensive review of CoinTracking, the portfolio manager that aims to make it easy to track all your digital currency trades and simplify tax time for crypto buyers.
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