This article is part of TokenTax's Cryptocurrency Tax Guide
The Australian Tax Office (ATO) provides guidelines on cryptocurrency taxes in Australia. Depending on your activity, the ATO treats taxation for cryptocurrencies like bitcoin as capital gains or as ordinary income taxes. They also have tax policies for mining, trading between fiat and other cryptocurrencies, gifts and purchases of goods and services.
In Australia, you pay tax based on your activities for the year trailing 30 June (starting July 1) of the year in which you file taxes. You have plenty of time to understand the nuances of your cryptocurrency taxes as the tax report deadline is October 31st.
Taxes on cryptocurrency transactions
The total capital gains for your crypto trades are reported under Section 18 of the Australian tax forms. Note that if you wait 12 months before selling or exchanging away the crypto, there is a 50% discount on your capital gains before the tax rate is applied.
Crypto to crypto transactions and crypto to fiat (i.e. AUD) trades are taxable events subject to capital gains taxes. When you sell or exchange a crypto asset, you subtract the cost basis (amount you originally paid for the crypto) from the proceeds (sales price total) to calculate your gain or loss from that trade.
In Australia, you are only allowed to take losses against future capital gains. For example, if you have a net capital loss this tax year, you cannot use it to reduce your income tax. You can use the net capital loss to offset your capital gains in future tax years.
Taxes on airdrops and staking
The Australian tax authority also deems crypto earned from airdrops and staking to be subject to ordinary income taxes. If you subsequently hold and sell the crypto for Australian dollars, the original value at the time you earned the crypto is your cost basis.
When you dispose of the crypto asset, you will be subject to capital gain or loss taxes. The ATO provides a few examples to clarify the two-step tax scenario:
The relevant form for income earned on crypto is Question 2 of the Australian tax forms. Here you report earnings that were not salary or wages subject to standard withholdings, such as tips and other income.
Tax implications for gifts and purchases
Gifts of crypto are treated the same as crypto trades to fiat currency. When you give crypto as a gift, that is your sale value, and you are taxed on the capital gains net your purchase value (cost basis).
For example, if you bought 600 Australian dollars worth of Bitcoin Cash and gave it as a holiday gift to your niece when the price was 800 Australian dollars, your net capital gain would be 200 Australian dollars.
Similarly, if you are given crypto as a gift, you are taxed on the capital gains at the time you exchange or sell the crypto. Your cost basis is the value at the time you received the crypto gift.
For example, if you received 800 Australian dollars worth of Bitcoin Cash as a holiday gift and exchanged it the next year for 1,000 Australian dollars, your net capital gain would be 200 Australian dollars.
Purchases with crypto are treated as personal use assets, so the taxes are the same as crypto trades to Australian dollars. In other words, when you spend crypto, you trigger tax on any capital gains you've made during the time you held that crypto. The original cost basis is taken into consideration by the ATO when you calculate your capital gain.
ATO tax treatment of crypto exchanges and other corporate platforms
If you are a corporation, such as an exchange or mining entity, the ATO taxes your cryptocurrency gains or income as ordinary income. You may also be able to deduct business expenses from your earnings.
Losses are also taken into account as part of the corporate accounting books, the same as would be true of any business activity utilizing Australian dollars. The ATO has examples for corporate crypto taxes on different business activities.
Special Australian tax considerations
There are other special considerations that cryptocurrency traders may run into which require more attention to details.
The ATO has not clarified whether you need to use certain accounting methods. Their online capital gains accounting information mentions FIFO and specific identification if you keep detailed records. It is still a grey area if other accounting methods would be allowed.
Per the Australian taxation office guidance, stolen crypto can be deductible as a loss. The ATO does require diligent documentation in this case.
Lastly, very short term crypto holdings less than 10,000 Australian dollars may be tax exempt if they are utilized in full to make a single, one-time purchase. The requirements are very strict, so trading activity would definitely not fall into this category.
For example, if you could only buy a television in Bitcoin, so you traded Australian dollars into Bitcoin for the exact purchase amount and bought the television that same day, you may be tax exempt, but this is a gray area where you should consult with a tax professional.