There are several simple things you can do to gain a deeper understanding of your cryptocurrency tax obligations and to make sure you’re fully compliant with all ATO regulations, including:
Hold for more than 12 months
If you’re classed as a cryptocurrency investor, you’ll be taxed on any capital gains resulting from your crypto transactions. However, if you hold your crypto for more than 12 months, you may be eligible for a 50% CGT discount.
Tax loss harvesting
Cryptocurrencies are notoriously volatile. If the value of some of the cryptocurrencies in your portfolio has plummeted and you sell them at a loss, you can use this to offset any capital gains for the year. This is a strategy known as tax loss harvesting and it can help you reduce your capital gains tax bill, so chat to a crypto tax expert to find out whether it’s a viable approach for you.
Do your own research
Take a closer look at the ATO’s guide to the taxation rules on cryptocurrencies for more information on how your crypto transactions will be taxed. You can also search for information or ask a question on the ATO Community forum.
Consider your intentions as to how you will use cryptocurrency before you buy. For example, if you initially acquire Bitcoin for everyday personal purchases but later decide to hold it to make a long-term profit, make sure you’re aware of the potential tax consequences.
Keep track of your crypto transactions as you go. This will be much easier than searching for all the information you need come 30 June. Most exchanges will let you export a spreadsheet of your trades to help you keep track.
Think about deductions
Are you eligible to claim any deductions for expenses related to your crypto transactions, such as if you run a Bitcoin mining business?
Disclose, disclose, disclose
Don’t assume that transactions made with Bitcoin and other cryptocurrencies are untraceable – they’re not. And don’t even think about “forgetting” to disclose the details of your crypto transactions, as the ATO is targeting crypto investors and has data-matching software in place to track transactions. The penalties for non-disclosure are severe.
However, the most important step you can take to better understand cryptocurrency tax is to talk to an expert. At Elite Tax Success, we have experts you can rely on, so don’t hesitate to reach out to us.