Will the ATO know about your crypto? You may be surprised to know that the ATO most likely knows you have crypto…if you have an account with an Australian cryptocurrency designated provider (DSPs), then it’s likely that the ATO already has your data.
Do I need to pay tax on my crypto gains?
In short, if you have engaged in any sort of cryptocurrency transaction during the year, it is likely that you will need to let the ATO know in one form or another.
Having said that, cryptocurrencies can be very complicated, and the end tax calculations will be dependent on a variety of factors.
If you are buying and selling cryptos as an investment, then you will be considered an investor. You will predominantly make your income from long-term gains (as well as other events like forks, staking, airdrops etc.). Most people dabbling in cryptocurrencies would fall into this category.
If you are an investor, then your cryptos are considered an asset (effectively the same as if you were investing in shares or an investment property) and any gains will be subject to CGT. As an example, if you purchase 1 Bitcoin for $20,000 and then sell it three months later for $40,000, you have made a ‘capital gain’ of $20,000 and will need to pay tax on this amount.
Further, if you hold the crypto for more than 12 months, you can reduce the gain by 50% and only pay tax on 50% of the profit.
Under the same principles, you can also claim a capital loss where you make a loss on any cryptocurrencies sold. These capital losses don’t necessarily reduce your overall taxable income but can be used to reduce any future capital gains and can be carried forward indefinitely.
How much extra tax do I need to pay?
If your wallet is in your personal name, you will pay tax on any capital gains at your personal marginal tax rate. This will vary, depending on your other taxable income, but if your only other income was a wage of $80,000, your marginal tax rate is 32.5% (2023 financial year).
How can I calculate my tax?
You can calculate the gains manually but that’s no fun. We suggest you use software such as Koinly or Cryptotaxcalculator where you just add these to your crypto exchange (or upload a CSV file of all your transactions) and let the software do the calculations and produce a Tax Report which you can send to your Accountant.
Crypto is on the ATO radar again and it can be a very complicated area of tax. So, ensure you talk to us today so you understand so these complex rules.
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