Cryptocurrency

Individuals

Cryptocurrency

Have you considered or already partaken in the cryptocurrency and digital asset world of investing? If you have, then you’re most likely aware that like any investment, it can still attract tax obligations from the ATO. Luckily, ITP Qld is a professional across this lively asset class and has all the expertise to help you prepare your crypto position and maximise any potential returns.

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Taxing Cryptocurrency

What exactly can be taxed?

Capital Gains

The ATO has specified that cryptocurrency is not considered a form of money; instead, it is classified as an asset for tax purposes. This means that any transactions involving cryptocurrency, such as buying, selling, or trading, are subject to capital gains tax, similar to other investment assets like shares or property.

Buying and Selling

Individuals can buy and sell cryptocurrencies, often with the intent of making a profit. They can purchase crypto using cash (AUD, USD, etc.) or by exchanging one type of cryptocurrency for another. These transactions are subject to capital gains tax (CGT), where the difference between the purchase price and the selling price or market value at the time of exchange is taxed.

Mining

Individuals and businesses can use computers or specialised ASIC miners to solve cryptographic problems and build blockchain blocks. If mining is considered a business, the cost of equipment and electricity may be deductible. Mining income, whether paid in tokens or other forms, is taxable and must be reported as ordinary income. If the tokens are later sold or exchanged, this may trigger a capital gains tax (CGT) event.

Staking

Staking rewards are taxable and should be reported as ordinary income based on their value at the time of receipt. For detailed advice on handling staking rewards and potential capital gains tax (CGT) implications, it’s best to consult a tax professional.

Goods and Services

Whilst cryptocurrencies can also be used as a replacement for cash in exchange for goods and services, they are not treated the same way as cash purchases from a tax perspective. Always keep records of transactions that you wish to claim as deductions, and speak to a professional before claiming.

Record Keeping

Transaction history can either be extracted from the blockchain itself or from the broker that is used. Although, it is important not to close down old accounts until an individual is certain that they would no longer need to access the transaction history for tax purposes. ITP has the experience and knowhow to best manage this record keeping process.