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Trading cryptocurrency

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Newbie

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Hi,
Can someone please provide some help as I am very confused with how I should be recording my capital gain and losses with trading cryptocurrency. Do I have to record my gains if I trade from one coin to another cryptocurrency coin and in this process would be profiting but hasn’t been sold into Australian dollars? Or do I only put my capital gain once I’ve turned into fiat (Australian dollar)? Because I don’t understand how I should be paying tax if I haven’t sold anything into money. Hope to find some clarification. Thanks a lot.
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Hi @Jack1,

 

Thanks for posting! You need to meet two main requirements for the disposal of your cryptocurrency to be exempt from CGT:

  • the cost of each asset disposed of has to be under $10,0000
  • the assets have to have been for your personal use.

Assets are ordinarily not considered to have been ‘for personal use’ where they have been used as an investment or exchanged or traded for profit making purposes.

 

Additionally, the method of payment from the disposal of your cryptocurrency doesn’t affect your eligibility to claim the exemption. As long as cryptocurrency is acquired solely for the purpose of disposing of it in order to obtain personal goods or services, then the form of payment does not change the character of the asset being used.

 

Thanks.

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Devotee

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I’m no expert but have just read the ATO guide:

https://www.ato.gov.au/general/gen/tax-treatment-of-crypto-currencies-in-australia---specifically-bi...

Account for what you bought and sold in each swap in $AUD value, and it’s only when you swap (not if the value is increased) that you have to bring that increase to account is the short answer the way I understand it but see what ATO says.

If you are a person not in the business the Tax Law that brings you into the picture is Capital Gains Tax. CGT as it’s known was bought in about 1985 to catch things like crypto, though of course crypto wasn’t around then. Secondly you don’t have to pay tax if whatever it is you sold you bought for $10,000 or less.

The first thing to know is as soon as you exchange crypto you have an event you must account for tax, that’s straight forwards. Whether it’s ETH for BTC, or BTC for BTC, you have to consider the value in $AUD of each side of the exchange.

What is important to clarify this here I think, is what is the boundary of the crypto currency for the $10,000 or less exemption rule.

The guidance uses the singular word Bitcoin.

If I was selling buying and selling marbles (the little round things) as a hobby that sounds like it is an individual marble.

If I was buying and selling spring Water then you’d one litre would’t be identifiable from another.

Bitcoin is a just a file with (effectively) something like the following one after the other:

A
Coin: 1006
Portion: 0.25 (of coin 1006)
Owner: Elster
(Elster bought this for $5000)

B
Coin: 1006
Portion: 0.25 (of coin 1006)
Owner: Elster
(Elster bought this for $9,500)

Later Elster sold 0.30 of Bitcoin for $14,500.

Is Lester over the bought for more than $10,000 what I sold CGT trigger?




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Best answer

Community Support

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Hi @Jack1,

 

Thanks for posting! You need to meet two main requirements for the disposal of your cryptocurrency to be exempt from CGT:

  • the cost of each asset disposed of has to be under $10,0000
  • the assets have to have been for your personal use.

Assets are ordinarily not considered to have been ‘for personal use’ where they have been used as an investment or exchanged or traded for profit making purposes.

 

Additionally, the method of payment from the disposal of your cryptocurrency doesn’t affect your eligibility to claim the exemption. As long as cryptocurrency is acquired solely for the purpose of disposing of it in order to obtain personal goods or services, then the form of payment does not change the character of the asset being used.

 

Thanks.

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Devotee Registered Tax Practitioner

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$10,000 PUA is a point of concern, but personally I feel this is something very difficult to argue if you are trading on an exchange an intention to profit exists.

 

All disposal whether to crypto or fiat will trigger CGT event A1 as far as I understand the law. There is some interesting software cointracking and delta which can do all the fiat conversion for you. Cointracking can even estimate your tax liability using Australian Tax Rates