If you have been involved in any crypto-related transactions in the last two years, it is likely that you would report it in your tax return. For clarity, cryptocurrency transactions include but not limited to buying, selling, staking, mining, trading, sending and receiving. It applies whether the transaction happened in Australia or not. In fact, the Australian Tax Office (ATO) wants to know about your cryptocurrency transactions.
Working out crypto tax can be a nightmare for many, plus there are so many facets to consider when preparing tax returns. Therefore, it is important to know exactly what you are doing and how to file your tax return correctly.
To give you a heads-up, we have put together a guide on the rules applicable in Australia regarding cryptocurrencies and tax. The information you would find below is strictly educational and not financial or legal advice.
Am I an investor or trader?
The first thing you need to work out is whether or not the ATO classifies you as an investor or a crypto trader.
A crypto investor is someone who buys and sells cryptocurrencies to make long-term capital gains. Investors are also involved in airdrops, staking, and forks. If you are an investor, you are subjected to Capital Gains Tax (CGT).
A crypto trader is in the business of buying and selling cryptocurrencies for short-term profits. Traders treat their profits as business income rather than assessing each transaction as a capital gain event.
Capital Gains Tax (CGT)
Just like a company's share, the ATO views cryptocurrencies as assets, which means each time you trade you need to assess your capital gains. If you buy cryptos and hold, you don't need to pay tax on your holdings, even if the value increases.
What’s my tax rate?
If you have formally registered your business with ASIC, your tax rate is the same as other companies - 27.5% on all income after deductions. But if you are an individual investor, your tax rate sits on Australia's sliding scale of individual tax rates.