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Re: How to declare Bitcoin?

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zac
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Hi, im beginning to trade bitcoin on an Australian exchange.

My question is, for example i bought $10,000 worth of bitcoin then sold the bitcoin 3 months later for $15,000 - How would i declare this on my tax? I understand i need to keep a record of the date of the transactions, is this the date of the purchase of the coins and sale of the coins? the amount of AUD, is this for the purchase of the coins and the sale of the coins? What the transaction was for, how would i declare the transaction? Would "Investment" be adequate? & Who the other party was (CoinspotAU(Btc address)).

 

Say i sold my bitcoins for $15,000 and tax time rolled around and i declared my total earnings as salary+$15,000 - How would i pay tax on the additional $15,000? Would the ATO send me a bill with the total tax to be paid (assuming they took what was available from my return)? 

Would it be best to seek an accountant to clarify any questions ive asked (providing i go ahead with digital trading from the outcome of this thread)?

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Hi Zac,

 

Thank you for your question. It seems that your questions is pretty complex because you may be moving into 'carrying on business' territory.


The basics are that they were sold before 12 months so there are no discounts for CGT. So it would be:

Sale          $15,000

Purchase  $10,000

Profit         $  5,000


You would pay tax on the $5,000.


However, don't forget any other expenses in acquiring the Bitcoin as this will be part of your cost base.


Its essentially treated as like sale of shares until you get into the 'carrying on a business' territory. Please check the ATO link below for extra information.


https://www.ato.gov.au/General/Gen/Tax-treatment-of-crypto-currencies-in-Australia---specifically-bi...


If you are going to be doing this on a regular basis I suggest you write to the ATO for a ruling or see a tax agent for peace of mind.

 

This is my personal view; I’m an ATO employee who chooses to help out here in my own time.

 

 

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Hi Zac,

 

Thank you for your question. It seems that your questions is pretty complex because you may be moving into 'carrying on business' territory.


The basics are that they were sold before 12 months so there are no discounts for CGT. So it would be:

Sale          $15,000

Purchase  $10,000

Profit         $  5,000


You would pay tax on the $5,000.


However, don't forget any other expenses in acquiring the Bitcoin as this will be part of your cost base.


Its essentially treated as like sale of shares until you get into the 'carrying on a business' territory. Please check the ATO link below for extra information.


https://www.ato.gov.au/General/Gen/Tax-treatment-of-crypto-currencies-in-Australia---specifically-bi...


If you are going to be doing this on a regular basis I suggest you write to the ATO for a ruling or see a tax agent for peace of mind.

 

This is my personal view; I’m an ATO employee who chooses to help out here in my own time.

 

 

Enthusiast

Replies 1

Further more:

Example...

 

Pruchase date: 20/03/2017

Purchase price: $AUD

+ other purchase cost e.g. broker fees

 

 

Sale date: 5/05/2017

Sale price: $AUD

-  sale cost e.g. broker fees

 

GAIN/LOSS

 

Treated as investment income until it is considered a business. Please see previous post.

 

This is my personal view; I’m an ATO employee who chooses to help out here in my own time.

Newbie

Replies 0

Could you also clarify the 12 month ruling for a 50 percent discount on long term capital gains tax?

Say (for ease of clarification) I've been purchasing exactly 1 bitcoin every month for the last 3 years up until this month (so let's say that I have 36 bitcoins in my account). Could I sell 24 of them today (all the ones purchased up to 12 months ago) as I have records of purchasing them more than a year ago and get the 50 percent captial gains discount?

I'm new Registered Tax Practitioner

Replies 20

Hello Zac,

 

You have asked a lot of good questions regarding the trading of Crypto Currencies.  Here are my answers for each:

 

1. How would I declare this on my tax? You wouldn't.  Your purchase of $10,000 would be considered a personal use asset, and therefore exempt from CGT.  If your purchase was for more than $10K, it would go in Section 18 of the tax return.

 

2. What is the record of transactions?  Your trading history.  Purchase and sale dates and amounts.  This should be tracked by the exchange (coinspot, etc).

 

3. How does the ATO bill me for the money made?  For this example, lets exclude additions and subtractions to the costbase/proceeds (brokerage, etc). 

 

You bought for $10K and sold for $15K leaving you with a profit of $5K. 

 

Your accountant would look for exemptions (less than $10k = personal use, so no CGT) or discounts (you held it for more than a year, so 50% discount). 

 

The net gain $5K (if no discount) or $2.5K then appears in your tax return at Section 18 and gets added to your income and you are taxed at the marginal rate. 

 

What do you mean marginal rate? So, just say you work at Dominos on $15K per year.  Your income would then increase from $15K to $17.5K or $20K depending if you got the discount or not.

 

At $17.5K, you are under the tax free threshold and pay 0% tax.  At $20K you are in the first tax bracket and would pay tax at 19% (you get offsets, etc so probably wouldn't pay tax anyway.)


@zac wrote:

Hi, im beginning to trade bitcoin on an Australian exchange.

My question is, for example i bought $10,000 worth of bitcoin then sold the bitcoin 3 months later for $15,000 - How would i declare this on my tax? I understand i need to keep a record of the date of the transactions, is this the date of the purchase of the coins and sale of the coins? the amount of AUD, is this for the purchase of the coins and the sale of the coins? What the transaction was for, how would i declare the transaction? Would "Investment" be adequate? & Who the other party was (CoinspotAU(Btc address)).

 

Say i sold my bitcoins for $15,000 and tax time rolled around and i declared my total earnings as salary+$15,000 - How would i pay tax on the additional $15,000? Would the ATO send me a bill with the total tax to be paid (assuming they took what was available from my return)? 

Would it be best to seek an accountant to clarify any questions ive asked (providing i go ahead with digital trading from the outcome of this thread)?


I am a tax agent who is very interested in digital currency.  Might do a podcast about this soon.

 

ATO Certified

Devotee

Replies 18

Hi @Dyln,

 

Thanks for your patience while we looked into this for you.

 

@WolifBolf's answer is great! We've used information from Tax Determination TD 2014/26 Income tax: is bitcoin a 'CGT asset' for the purposes of subsection 108-5(1) of the Incom... to add some extra detail for you.

 

Let’s start with the principle that Bit-coin is considered to be a CGT asset; any gain from disposal of bitcoin will be subject to capital gains legislation.


However, gains from disposal of personal use assets are disregarded. Personal use assets are CGT assets, other than collectables, used or kept mainly for the personal use or enjoyment of you or your associates. 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.

 
For those bitcoin that are just used for personal consumption such as paying a domestic bill then there would be no tax implications.


However, in contrast, if your bitcoin activities were undertaken as part of profit making activities or your occupation included dealing in such kinds of assets, or other similar forms of profit focussed activities, then disposals of Bitcoin would be subject to tax as ordinary income, irrespective of any CGT exemption.  This is because if gains are taxed as ordinary income then any CGT exemptions cannot apply to ordinary income taxation.


For example:

  • For Events A and B, where the mined Bitcoin were acquired as part of a hobby and then just sold or used to pay private expenses then these situations involve disposals of personal use assets disregarded under CGT rules.
  • However, if the Bitcoin mining was undertaken as part of a new form of business activity or profit making strategy then the Bitcoin may have been acquired as part of profit making or business activities and any profit on disposal taxed as ordinary income.  
  • For Event C, if the Bitcoin was just traded for a more stable form of investment then the bitcoin trade would be treated as a disposal of a personal use asset under CGT rules. However, if this was done with the intention to be part of profit making or trading activities that you ordinarily undertake then any gains or losses would be taxable or deductible irrespective of capital gains tax treatment.

Hope that helps! Thanks.

I'm new

Replies 15

Hi @AmandaE,

 

I just started to trade some bitcoins and some other cryptocurrencies this year. The amount of coins that I have never equal or more than 10k AUD at any time, however I did some transactions and the total of the transactions volume (buying and selling) is around 15K. Is it still treated as personal asset or is it already subjected to CGT?

 

Thanks

 

 

Devotee

Replies 7

Hi @dind,

 

Thanks for your post! Due to the complexity of your question, we've referred it through to a specialist area for a response.

 

Our offices will be closed from tomorrow until 2 January 2018, and we're aiming to get a reply to you once we get back.

 

Thank you for your patience. Happy holidays and happy new year!

I'm new

Replies 6

Hi,

Can you help me please. I want to be sure i am meeting my tax requiements with regard to this.

 

If i borrow $9000 and use it to purchase Bitcoin on an Australian exchange then transfer it to a foreign exchange where i trade it for other crypto currencies in an attempt to increase the amount of bitcoin i hold...

 

1) What are my record keeping requirements? If i use 'bot' software to do the trading automatically - there may be potentially thousands of transactions a week.

2) Do i need to pay CGT on each transaction (eg From Bitcoin to Etherium and then back to Bitcoin) or only once the bitcoin is exchanged back to AUD?

3) If i increase the amount of bitcoin i hold (either through trading as mentioned above or simply purchase more) but hold the bitcoin for a number of years, at what point am i required to pay tax on it? 

 

Thanks.

 

 

I'm new

Replies 4

Hi, 

 

I am facing the same questions as you and would like to add on a few if I may. I am new to digital currency and would like to also know:

 

4) If you were to go from AUD - BIT but never return to AUD and just use BIT as a currency to buy goods, do you need to pay CGT as it's just another currency? Say you bought $1000 Australian worth of bitcoin, that bitcoin went to say $4000 in value, instead of transferring it back to aud you just use the currency at whatever value it happens to be. I'd assume it would be like transferring AUD to USD, the US dollar gets stronger than you just use the US dollar instead of Australian dollar to buy stuff.

 

5) I think I read somewhere if it's under $10,000 its considered personal use or a hobby or something like that. Does this mean under $10,000 profit or the trade in total needs to be under $10,000? Is this a per trade figure or a yearly figure?

 

Thank you in advance ATO, it would be great to get some clear answers on these questions Smiley Happy

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