Cryptocurrencies and tax


With the explosive rise of Cryptocurrencies in Australia and around the world, the ATO is consulting with tax experts and lawyers to help identify and track cryptocurrencies transactions to ensure all taxes are being paid.


What is cryptocurrency?

Cryptocurrency is a digital currency, in which complex encryption techniques are used to regulate the generation and transfer of units of currency, independently of a central bank.  There are hundreds of cryptocurrencies around the world. Among them, Bitcoin is the most prominent example - in fact, other cryptocurrencies are sometimes referred to as altcoins, as in alternatives to Bitcoin.


The treatment and tax implications for cryptocurrencies in Australia

The Australian Tax Office (ATO) takes the view that cryptocurrency transactions are like a barter arrangement and they are taxed accordingly. The ATO confirmed in a recent determination that it doesn't currently regard it as a form of money or a foreign currency.


Moreover, GST will cease to apply to transactions entered into after 1 July 2017. However, it is regarded as an asset for Capital Gains Tax (CGT) purposes and therefore if you sell cryptocurrencies and convert them to Australian dollars, you may be subject to capital gains tax (CGT). This ruling was confirmed in a recent ATO determination. The Capital Gain Tax rules may operate correspondingly to the foreign currency tax rules in calculating the gain or loss on conversion from Crypto to Crypto, for instance, buying NEO or ETH with BTC.


If your intention in purchasing cryptocurrencies is to use it to buy goods or services for personal consumption, then any profit from resale will be assessable as a capital gain. In other words, any appreciation in the value of the capital will be taxable at marginal rates. The 50% capital gains tax discount may also apply if the cryptocurrency is held for at least 12 months, which means only half of the gain is taxed. However, there is a helpful exception; if the original cost of the cryptocurrency purchased was under $10,000, any gain made will be tax free because it is considered to be a "personal use asset".


Eventually the tax treatment on your cryptocurrency profits depends on your personal circumstances. A failure to thoroughly examine these circumstances and apply them to tax law may result in payment of unnecessary tax or a risk of ATO audit for non-payment. Therefore, if you are sitting on or have made profits from cryptocurrencies, then please do not hesitate to call us on (02) 9899 3044 or email: . We're always up for a chat to point you in the right direction.

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Norwest Business Park
Baulkham Hills, NSW 2153 Australia
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P: (02) 9899 3044
F: (02) 9899 1524

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