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Re: How to declare Bitcoin?

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Observer

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I'd also be really interested in an aswer to this one too. Thanks.

ATO Certified

Community Support

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Hi @Lisaaaaa,

 

Thanks for your patience while we worked through these cryptocurrency enquiries.

 

Based on the scenario you outlined in your original post, you’d be subject to CGT on the purchase of goods.  Capital Gains tax applies to the disposal of assets - including items of cryptocurrency. If you sell or exchange cryptocurrency assets CGT can apply.

 

For assets with costs (to you) under $10,000 and used ‘personally’, a ‘personal use’ exemption can apply on disposal of the asset. In the cryptocurrency context ‘personal use’ can apply where an owner acquires cryptocurrency with the intention of buying items for themselves.

 

However, in your example, where you chose to hold the cryptocurrency so it increased in value, it would not be acquired with the aim of buying personal use items. 

 

We’ve posted a knowledge base article here in the Community that explains our view on personal use assets – check it out here

 

Thanks.

ATO Certified

Community Support

Replies 0

Hi @Numbers,

 

Thanks for your post!

 

Cryptocurrency acquired for investment purposes is not exempt from capital gains tax as it doesn’t qualify as a personal use asset.

 

Check out our new knowledge base article on personal use assets here

 

Thanks.

Newbie

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Devotee

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Hi @bills,

 

Thanks for posting! We’re sorry for the delay in replying, and we appreciate your patience.

 

If you’re purchasing cryptocurrencies as an investment, capital gains tax rules will apply. If you make a profit when you dispose of your cryptocurrency, you’ll make a capital gain; if you lose money, you’ll make a capital loss.

 

Keeping detailed records is important when it comes to managing your capital gains tax (CGT) obligations. You’ll need to keep the following records in relation to your cryptocurrency transactions:

  • the date of the transactions
  • the value of the cryptocurrency in Australian dollars at the time of the transaction (which can be taken from a reputable online exchange)
  • what the transaction was for and who the other party was (even if it’s just their cryptocurrency address).

Even if you use automated (bot) software, you’ll need to be able to track your purchases and trades to help you calculate your overall position and your cost base.

 

You also need to calculate your capital gain or loss every time you dispose of a capital asset – in this case, when you dispose of one cryptocurrency and acquire another. This will also apply if you choose to “cash out” your crypto investments to fiat currency (or AUD). 

 

Hope that helps!

Initiate

Replies 1

Hi, "Any personal use asset you acquired for less than $10,000  is disregarded for CGT purposes. If you did mine a small amount of Bitcoin as part of a hobby then your cost is generally only the actual costs incurred by you".

A currency was purchased for  AUD$50 and exchanged for bitcoin, bitcoin then climbed in price to AUD$9000. Say a profit was made in the millions, how would this be taxed? It was acquired for less than 10K, so there should be no tax on to pay.

As an addition. Tax payable on cryptocurrency is far to complex.Even accountants are struggling with the interpretations laid down by the ATO. Regardless of how cryptocurrency is acquired, tax should only be payable on exchanging (sale) to a fiat currency.

Bitcoin is property and is an asset, and as such tax is not paid on it until it is disposed of.

Devotee

Replies 0

Hi @goldeagle,

 

Thanks for your post. Your post raises a few points to consider:

 

  • Cryptocurrency is not a form of currency for tax purposes - it's considered to be a capital asset, and capital gains tax (CGT) will apply in certain circumstances.
  • If you purchased cryptocurrency with the intention to invest and make money from your investment, the 'personal use asset' test does not apply. Cryptocurrency is only a personal use asset where you acquire it to make purchases with that cryptocurrency, and where you only purchase amounts less than $10,000 AUD.
  • If your cryptocurrency investment returned a profit, you'd calculate the cost base of your cryptocurrency and apply it against your profit to see if you made a capital gain. If you made a capital gain, you may be able to apply a discount to reduce the gain further. You'd add this reduced capital gain to the rest of your taxable income, and pay tax at the relevant marginal rate.

Hopefully this additional information helps to explain the tax treatment of cryptocurrencies. If you'd like more tailored information based on your circumstances, you can contact our early engagement team to discuss how we think tax law applies to your personal situation.

 

Thanks!

Newbie

Replies 0

Hey Zac,

 

ATO has published guidelines and it's pretty simple to read. Here's some of them in a simplified way. https://hackernoon.com/guide-for-understanding-cryptocurrency-taxes-in-australia-23f32474a229

 

Also, record keeping is one of the important things in this volatile conditions. Since you need to keep track of every AUD to BTC transactions, BTC to alts transactions and back to Fiat if you've ever sold. Keeping all this is difficult.  

 

There are few tools like the one mentioned in above article which could help you consolidate your transactions, review them and calculate your capital gains. All the best for upcoming tax season. 

 

 

Highlighted

Newbie

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Hey there! The scene with capital gains calculation i.e. the Bitcoin tax has changed a lot since we started discussing this. Now we have got good amount of tools with varying offerings. I've given multiple tools a try like cryptotaxbot, beartax and cointracking - All of them are paid, but the question is to check what you get for your money! #bangforyourbuck 

 

cointracking is the one which is well known for everyone - been using it for portfolio. Worked well as a portfolio but for tax calculation, there are a lot of negative balances and errors.

beartax is one I felt satisfied and used it to get my tax documents. moderate number of exchanges, but those you need. Pricing is reasonable for the support and reliable results I've got

mycryptotaxbot is AU based, but charges for more than One exchange. List fo exchanges look static as nothing was happening.

 

Will evaluate more and let you guys know. Thanks for reading. 

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