Yes, you must pay tax on your crypto if you hold it as an investment. In crypto investors' ideal world, taxes wouldn't apply to digital currency; however, as the federal government considers your crypto investments to be assets, they fall under the Capital Gains Tax (CGT) umbrella.
The ATO taxes cryptocurrency as a “capital gains tax (CGT) asset”. This means you must declare the transactions (on your tax return) for every time you traded, sold, or used crypto. The ATO does not see crypto as money, and they don't class it as a foreign currency.
Yes, the ATO tracks crypto. Your data is likely already on file with the ATO if you've got an account with an Australian cryptocurrency designated service provider (DSP).
Investors must report crypto gains, losses and income in their annual tax return on Form 8940 & Schedule D. Evading crypto taxes is a federal offence. Penalties for tax evasion are up to 75% of the tax due (maximum $100,000) and 5 years in jail.
The ATO rarely views Bitcoin & other cryptocurrencies as currency or money. Instead, for the purposes of tax they class cryptocurrency as property. As such, trading falls under the Capital Gains Tax (CGT) regime. This includes all cryptocurrency coins, NFTs, tokens & stablecoins.
One of the ways you can reduce this taxation is to HODL. Australian investors who hold assets for longer than a year enjoy a 50% long-term Capital Gains Tax discount when they sell, swap, spend, or gift them.
Report disposal of crypto
You may need to include a capital gain or loss in your income tax return. You must report a disposal of crypto for capital gains tax purposes. Disposing includes when you: exchange one crypto asset for another.
You must report income, gain, or loss from all taxable transactions involving virtual currency on your Federal income tax return for the taxable year of the transaction, regardless of the amount or whether you receive a payee statement or information return.
What happens if you don't report taxable activity. If you don't report taxable crypto activity and face an IRS audit, you may incur interest, penalties, or even criminal charges.
The IRS treats cryptocurrency as “property.” If you buy, sell or exchange cryptocurrency, you're likely on the hook for paying crypto taxes. Reporting your crypto activity requires using Form 1040 Schedule D as your crypto tax form to reconcile your capital gains and losses and Form 8949 if necessary.
Yes. The ATO expects you to declare any capital gains or losses, as well as any income from CoinSpot. If you have non-taxable transactions - for example, buys or transfers - generally you do not need to declare these to the ATO.
Your Australian bank account statements are accessible to the ATO. The ATO is endowed with extensive legal authority, which allows it to access your personal bank information. Because of these capabilities, the ATO is able to get your Australian bank statements straight from your financial institution.
Many crypto traders got CP2000 audits because they failed to report on their return a 1099-K from a crypto exchange. If you received a 1099-K, you must tell your accountant or enter it into the tax software you are using; otherwise, you will get the CP2000 letter.
Offset gains with losses
As with any investment, you can take advantage of crypto gains by also claiming losses on other investments the year you realize your profit. That means if you made $30,000 for selling Bitcoin but lost $30,000 for selling Ethereum, you wouldn't owe any tax since you broke even.
Yes, Binance reports user transaction data to the ATO, and the ATO has been providing crypto tax guidance since 2014. You'll be facing an audit and penalties from the ATO if you don't declare your crypto gains.
The Most Common IRS Crypto Audit Triggers To Look Out For
The IRS has audited about 0.6% of personal returns and 0.97% of all corporate returns between 2010 and 2018.
Tax Consequences
Transactions involving a digital asset are generally required to be reported on a tax return.
Moving cryptocurrency between wallets that you own is not taxable. Typically, cryptocurrency disposals — such as selling or trading away your cryptocurrency — are subject to capital gains tax. You'll incur a capital gain or loss depending on how the price of your crypto changed since you originally received it.
Do I have to pay taxes if I sell crypto at a loss? Selling cryptocurrency at a loss can reduce your tax bill by offsetting capital gains from cryptocurrency, stocks, and other assets.
Short-term crypto gains on purchases held for less than a year are subject to the same tax rates you pay on all other income: 10% to 37% for the 2022-2023 tax filing season, depending on your federal income tax bracket.
The most common use of crypto is as an investment, in which case the crypto asset is a capital gains tax (CGT) asset. If you acquire a crypto asset as an investment, transactions such as disposal or exchange or swap are a CGT event and you may make a: capital gain. capital loss, which can reduce capital gains you make.
Taxpayers are required to report all cryptocurrency transactions, including buying, selling, and trading, on their tax returns. Failure to report these transactions can result in penalties and interest.
How to report cryptocurrency capital gains in Australia. Once you have calculated your gain/loss from each transaction, add up all of your gains and losses to arrive at your net capital gain or loss for the full tax year. Report this net capital gain under section 18 of the Australian tax forms.