Cryptocurrency and Tax

Trading of cryptocurrency involves tax implications, The below 3 steps will help to manage your tax responsibilities with cryptocurrency.

  • Reporting disposal of cryptocurrency: Disposals should be reported for capital gains, disposal happens when cryptocurrency is exchanged with another crypto or if there is a trade sale of crypto or conversion of crypto to a currency established by government regulation. Transferring crypto from one digital wallet to another will not attract any tax, however, if the crypto holding reduces during the transfer to cover the network fees, the transaction fees are disposal and have capital gains consequences.
  • CGT calculation: To work out the capital gains or loss, we need to determine the value of crypto purchases and the sales in Australian dollars.
  • Maintain Records: Records needs to be maintained for 5 years for all transactions including acquiring, holding, and disposing of crypto.

How to keep records:

A simple spreadsheet can be created, or a professional software can be used. Digital copies can be scanned for record-keeping. Some capital gains or losses that arise from the disposal of a cryptocurrency that is a personal use asset may be disregarded. However, crypto is not a personal use asset, if it is used as an investment, as part of a profit-making scheme, or in the course of carrying on a business.

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