The updated guidelines help you learn more about the tax implications of cryptocurrency, including the practical issues of exchanging one cryptocurrency for another and associated record-keeping requirements.
If you have purchased, traded or profited from the sale of cryptocurrency, you may have tax-related obligations of which they are unaware.
The term cryptocurrency is generally used to describe a digital asset in which encryption techniques are used to regulate the generation of additional units and verify transactions on a blockchain. Cryptocurrency generally operates independently of a central bank, central authority or government.
The creation, trade and use of cryptocurrency is rapidly evolving. This information is the ATO's current view of the income tax implications of common transactions involving cryptocurrency. Any reference to 'cryptocurrency' in this guidance refers to Bitcoin, or other crypto or digital currencies that have the same characteristics as Bitcoin.
If you are involved in acquiring or disposing of cryptocurrency, you need to be aware of the tax consequences. These vary depending on the nature of your circumstances.
Everybody involved in acquiring or disposing of cryptocurrency needs to keep records in relation to their cryptocurrency transactions.
If you have dealt with a foreign exchange and/or cryptocurrency there may also be taxation consequences for your transactions in the foreign country.
A CGT event occurs when you dispose of your cryptocurrency. A disposal can occur when you:
- sell or gift cryptocurrency
- trade or exchange cryptocurrency (including the disposal of one cryptocurrency for another cryptocurrency)
- convert cryptocurrency to fiat currency like Australian dollars, or
- use cryptocurrency to obtain goods or services.
If you make a capital gain on the disposal of a cryptocurrency, some or all of the gain may be taxed. Certain capital gains or losses from disposing of a cryptocurrency that is a personal use asset are disregarded.
If the disposal is part of a business you carry on, the profits you make on disposal will be assessable as ordinary income and not as a capital gain.
While a digital wallet can contain different types of cryptocurrencies, each cryptocurrency is a separate CGT asset.
The ATO will continue to monitor community feedback about the tax treatment of cryptocurrencies, and update taxpayers on new and emerging risks.
If you have any uncertainty around the tax treatment of using and disposing of cryptocurrency either personally or in your business, please contact Collins Hume on 02 6686 3000.