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Is Cost of Crypto an Allowable Deduction?

Newbie

Views 504

Replies 6

Hi,

 

I'd like to understand the following scenario as an investor as well as a business:

 

I purchased $1000 worth of Coin A, it is worth $100,000 6 months later. I sell all of Coin A for Coin B and now have $100,000 worth of Coin B.

 

Since a trade occurred this counts as disposal so I have a capital gain of $99,000. However, does the purchase of Coin B count as an allowable deduction? Does this differ between an investor vs. a business?

 

Thanks.

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

ATO Community Support

Replies 1

Hi @days

 

If you hold cryptocurrency for sale or exchange in the ordinary course of your business, the trading stock rules apply, and not the CGT rules. Therefore the cost of acquiring cryptocurrency held as trading stock is deductible.

 

You can find more information about the Tax treatment of Cryptocurrency on our website. This includes Cryptocurrency held as an investment and Cryptocurrency used in business.

 

Hope that helps

 

Ari

6 REPLIES 6

Devotee

Replies 5

No, the cost of purchasing Coin B is clearly never going to be a deduction regardless of the entity. A CGT event occurs only at the time of sale

Newbie

Replies 4

So does this mean there is CGT on the $99,000? Even when I do not have direct liquidity to pay this due to my holdings in Coin B?

Devotee

Replies 3

Yes, that is how CGT works

Newbie

Replies 2

Thanks for your help. I was under the impression that cryptocurrency was taxed similarly to shareholding?

And taking a look on the ATO website it says:

For a shareholder:

  • the transaction costs of buying or selling shares is not an allowable deduction against income, but are taken into account in determining the amount of any capital gain

For a share trader:

  • costs incurred in buying or selling shares – including the cost of the shares – are an allowable deduction in the year in which they are incurred

From what you're saying, it sounds like cryptocurrency is taxed like a shareholder for both investors and businesses?

Most helpful response

ATO Community Support

Replies 1

Hi @days

 

If you hold cryptocurrency for sale or exchange in the ordinary course of your business, the trading stock rules apply, and not the CGT rules. Therefore the cost of acquiring cryptocurrency held as trading stock is deductible.

 

You can find more information about the Tax treatment of Cryptocurrency on our website. This includes Cryptocurrency held as an investment and Cryptocurrency used in business.

 

Hope that helps

 

Ari

Newbie

Replies 0

Thank you.