• 190 Online
  • 15598 Members
  • 18282 Posts

ATO Community

Confused about tax on cryptocurrency

Ask a question

This conversation has been closed. Please start a new thread.

I'm new

Views 53826

Replies 43

Let's say that you purchase some cryptocurrency while the price is very low and you purchase $2000 worth. If that price were to increase a substantial amount and your investment is now worth $10,000,000, would you have to pay tax on the $9,998,000 capital gains? Also, as the tax is based on your income tax, what happens if you are either unemployed or you make less than $18,200?

 

Thank you.

 

1 ACCEPTED SOLUTION

Accepted Solutions

Best answer

ATO Certified

Community Manager

Replies 30

Hi @Zuvan,

 

Welcome to our Community!

 

Generally speaking, there are no income tax or CGT implications if you simply pay for goods or services in bitcoin (i.e. for your personal use). However, if you use bitcoin for investment or business purposes, capital gains tax will apply.

 

Although it's referred to as capital gains tax (CGT), this income or loss is actually part of your income tax, not a separate tax.You need to report capital gains and losses in your income tax return and pay tax on your capital gains.

 

When you make a capital gain, it is added to your assessable income and may significantly increase the tax you need to pay. Most people can generally discount a capital gain by 50% if they hold the asset for more than one year.

 

There are three methods to work out your capital gain:

We produce a detailed guide to capital gains tax that helps explain how CGT applies to different assets.

 

Hope that helps!

EDIT: We've updated our website with a guide explaining how cryptocurrency (including bitcoin) is taxed in Australia. You can also find the following articles about cryptocurrency in our Knowledge Base:

Keep an eye out on our Tax Knowledge Base for new articles!

Thanks, @AmandaE

43 REPLIES 43

Best answer

ATO Certified

Community Manager

Replies 30

Hi @Zuvan,

 

Welcome to our Community!

 

Generally speaking, there are no income tax or CGT implications if you simply pay for goods or services in bitcoin (i.e. for your personal use). However, if you use bitcoin for investment or business purposes, capital gains tax will apply.

 

Although it's referred to as capital gains tax (CGT), this income or loss is actually part of your income tax, not a separate tax.You need to report capital gains and losses in your income tax return and pay tax on your capital gains.

 

When you make a capital gain, it is added to your assessable income and may significantly increase the tax you need to pay. Most people can generally discount a capital gain by 50% if they hold the asset for more than one year.

 

There are three methods to work out your capital gain:

We produce a detailed guide to capital gains tax that helps explain how CGT applies to different assets.

 

Hope that helps!

EDIT: We've updated our website with a guide explaining how cryptocurrency (including bitcoin) is taxed in Australia. You can also find the following articles about cryptocurrency in our Knowledge Base:

Keep an eye out on our Tax Knowledge Base for new articles!

Thanks, @AmandaE

Newbie

Replies 0

Hi,

I do not beleive that is exactly correct.

I think that should read, Generally, there are no income tax or GST implications if you're not in business...

Ali
I'm new

Replies 7

Hi Amanda, just to confirm my understanding - if I'm a personal investor, I don't have to pay CGT until I have a gain or loss that exceeds the $10k threshold?

Community Manager

Replies 5

Hi @Ali,

 

Generally speaking, if you use bitcoin to purchase goods or services for personal use or consumption, any capital gain or loss from disposal of the bitcoin will be disregarded (as a personal use asset) provided the cost of the bitcoin is $10,000 or less.

 

If you have acquired bitcoin as an investment capital gains tax could apply (although see information about using bitcoin for personal transactions). If you are not carrying on a business of bitcoin investment, you will not be assessed on any profits resulting from the sale or allowed any deductions for any losses made.

If you need advice on how tax law applies to your personal situation, write to us to request a private ruling. Private rulings are free, and we aim to reply within 28 days.

 

Thanks.

I'm new

Replies 1

Hi Amanda, 

 

How do you apply the CGT rules on the $10,000 profit?

 

 

Is  this applied to individual investments or across the board for the tax year?

 

For example: 

 

$5,000 invested in Bitcoin grows to $20,000 and you profit $15,000. I understand that the $15,000 profit will have CGT applied? Is this correct?

 

Then if $3,000 investing into Ethereum grows to $9,000 and you profit $6,000, is this exempt because it's a separate investment? Or are you new taxable on $21,000?

 

 

Thanks!

Newbie

Replies 8

@AmandaE, it would really help to work through a couple of scenarios from @Zuvan's example.

 

1. If used his $10,000,000 to buy a house using Bitcoin, would this be classed as a personal use asset?

2. If he bought the cryptocurrencies as an investment and converted the $20m back to AUD, would this generate a taxable capital gains event?

 

Cheers,

Mark

Community Support

Replies 6

Hi everyone,

 

It’s great to see so much interest in how tax applies to cryptocurrency! We really appreciate your questions, and we’re learning more about the kind of information you’re looking for with every post.

Cryptocurrency is constantly evolving and changing, and we want to make sure that we’re providing information you can rely on. We’re working with specialist areas in the ATO to get the answers you’re looking for, but there’s been a huge increase in enquiries over the last few weeks and it may take us a while to get back to you.

 

If you’ve posted or subscribed to this thread, you’ll get an email when we add a new response – you can subscribe to a post by signing into your account and clicking the Topic options icon up in the top right hand corner of the post you’d like to follow. Select ‘Subscribe to RSS Feed’ to get updates.

 

In the meantime, you can find general information on the tax treatment of cryptocurrency on our website, or contact our early engagement team if you need personalised advice to help you manage your tax affairs.

 

Thank you so much for your patience and your support.

I'm new

Replies 1

Hi,

As I understand it, once crypto is converted back to Australian Dollars and a capital gain is recognised then tax will be paid on this capital gain. So if someone were to buy Bitcoin at say $1000 then transfer it to ethereum when bitcoin reaches $2000 then this will not trigger a capital gain event. But if that someone then sold ethereum back to Australian dollars, then this will trigger a capital gain event as the profit is then recognised. Is this correct?

Thanks

I'm new

Replies 0

@AmandaE thanks for your responses. I would like to clarify your statement:

 

"If you are not carrying on a business of bitcoin investment, you will not be assessed on any profits resulting from the sale or allowed any deductions for any losses made."

 

I read this as any person who has made a personal bitcoin investment (i.e. not as part of a business of bitcoin investment) will not be required to pay CGT on profits from the sale of that bitcoin. Is this correct? Seems too good to be true but it is what your statement seems to mean - at least to me. 

Top Solution Authors