Crypto and your Tax Return

CRYPTO AND YOUR TAX RETURN
​Over the last few years, we have seen an increase in our clients investing in cryptocurrencies. ​

And now, so have the ATO!

The ATO considers crypto investments as an asset for tax purposes. Transactions involving crypto may be subject to Capital Gains Tax (CGT). If you dispose of any crypto, you may be required to pay CGT on any capital gain. The ATO also requires you to keep accurate records of acquiring the crypto and any other associated costs.

The ATO uses a combination of data matching, risk profiling, compliance activities, voluntary disclosure and education to track and identify businesses and individuals that are not reporting their crypto transactions. This document explains to you how crypto is taxed and explains in more detail the ways that you will be better off with our recommendations. HOW IS CRYPTO TAXED? When Crypto is Taxable The most common use of crypto is as an investment, in which case the crypto asset is a capital gains tax (CGT) asset. If you acquire a crypto asset as an investment, transactions such as disposal or exchange or swap are a CGT event and you may make a: • capital gain • capital loss, which can reduce capital gains you make. You can’t deduct a net capital loss from your other income. You may be able to reduce capital gains using the CGT discount if you hold your crypto asset for at least 12 months. In general, a CGT event happens when you dispose of a CGT asset. For the purposes of crypto assets, that may be when you: • sell a crypto asset • gift a crypto asset We look forward to speaking with you: (03) 8805 8000 • trade, exchange or swap one crypto asset for another • convert a crypto asset to Australian or foreign currency • buy goods or services with a crypto asset. • transfer between crypto wallets Before you calculate CGT on your crypto assets, you will need to: • check you have records for your crypto assets and crypto transactions • convert the value of the crypto assets into Australian dollars. You need to keep details for each crypto asset as they are separate CGT assets. When Crypto is Non-Taxable A crypto asset is a personal use asset if you keep or use it mainly for personal use. The most common situation of personal use of crypto assets is to buy items for personal use or consumption. The relevant time for determining if a crypto asset is a personal use asset is when you dispose of it: • A crypto asset you acquire and use in a short period of time to buy items for personal use or consumption is more likely to be a personal use asset. • A crypto asset you acquire and hold for some time before you use it, or only use a small proportion of it, to buy items for personal use or consumption is less likely to be a personal use asset. A capital gain on the disposal of a crypto asset is disregarded if both: • it is a personal use asset • you acquire it for less than $10,000. A capital gain on a personal use asset is not disregarded if it cost you more than $10,000 to acquire the asset. We are here to help you correctly report your crypto gains or losses in your Tax Return. Our assistance will help you avoid being charged fines and penalties by the ATO if you don’t report your crypto gains and losses or if you report them incorrectly. To achieve these benefits for you, we will need to: • Set you up on our Crypto Client Management Portal • Assist you to link your crypto wallets to our Crypto Client Management Portal • Review your crypto transactions We look forward to speaking with you: (03) 8805 8000 • Advise you as to which transactions may fall under the “personal use” category and not be taxable or if they fall under the investment category and be subject to CGT • Prepare Crypto Tax and Transaction Reports to keep on your file in the event of an ATO audit • Include any relevant capital gain or loss in your Tax Return along with any required CGT Schedules If you have any questions about any of the above, please feel free to contact Hansens on 03 8805 8000.