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The Australian Taxation Office (ATO) has released updated information on claiming cryptocurrency losses and gains in your tax return. The first point to understand is that cryptocurrency losses and gains are only reported in your tax return when you dispose of the cryptocurrency. This means selling it, converting it to fiat currency, exchanging it for another type of asset, or buying something with it. You cannot recognize market fluctuations or claim cryptocurrency losses because the value of your crypto assets changed until the loss is realized or crystallized.
Reporting Cryptocurrency Losses and Gains
Gains and cryptocurrency losses from the disposal of cryptocurrency should be reported in your tax return in the year that the disposal occurred. If you made a capital gain on cryptocurrency that was held as an investment and you held the crypto for more than 12 months, you may be able to access the 50% Capital Gains Tax (CGT) discount and halve the tax you pay.
If you made a loss on the cryptocurrency (capital loss) when you disposed of it, you can generally offset the loss against capital gains you might have (unless the crypto is a personal use asset). However, you can only offset cryptocurrency losses against capital gains. You cannot offset these losses against other forms of income like salary and wages. If you don’t have any capital gains to offset, you can hold the cryptocurrency losses and carry them forward for another future year when you can use them.
Additional Considerations and Record Keeping
If you earned income from crypto such as airdrops or staking rewards, then these also need to be reported in your tax return. And remember, keep records of your crypto transactions. The ATO has sophisticated data matching programs in place, and cryptocurrency reporting is a major area of focus.
A crypto gain or “capital gains event” occurs when you dispose of your cryptocurrency. Remember, “dispose” means to sell, gift, trade, exchange, convert, or use crypto to buy things. A capital gain in crypto is the same as a gain in any asset you own – like a share. The gain is the difference in value from when you got your crypto to when you sold it. You’ll make a capital gain if the proceeds from the disposal are more than what it cost you. Always remember that this includes fees, known as the cost base. The cost base is the purchase price of your crypto plus the costs related to acquiring or disposing of it, like transfer/transaction fees.
Capital gains is a very complicated topic to fully understand. The amount of tax you pay on a crypto gain depends on your individual tax circumstances. It’s always best to seek the advice of a registered tax agent. Tax agents can accurately estimate how much tax you need to pay on your crypto gains – or how much extra you could get back from the ATO.
Even if you only made cryptocurrency losses, you still have to report it on your tax return. In fact, it’s in your best interest to report your cryptocurrency losses. This is one of the best ways to reduce your crypto taxes; you might be eligible to claim a capital loss on your tax return. Again, it’s best to seek the advice of a registered tax agent. If you go it alone, without being 100% across what you’re doing, it could cost you hundreds or even thousands of dollars!
Yes, any swap or exchange of cryptocurrencies is a taxable event in Australia. For example, if you exchange Bitcoin for Ripple, the ATO and other tax agencies will treat this as a sale (disposal) of Bitcoin at the market price you received at the time.
To learn more about cryptocurrency and capital gains tax, visit the ATO. If you’re unsure of how your cryptocurrency gains or losses affect you, speak to an expert.
