Cryptocurrencies were first developed as a digital currency to use as money.
You can buy or sell crypto assets or cryptocurrencies on a trading platform using money. Or you can buy or sell it directly. You can also gift or donate it.
While cryptocurrencies are not legal tender in Australia, they have caught the attention of the Tax Office. Therefore, if you do own any crypto assets, it is important to be aware that most activities involving crypto assets amount to a transaction, which gives rise to a Capital Gains Tax (CGT) event. Any time you dispose of a crypto asset it is necessary to determine whether you have made a capital gain or loss. This then needs to be reported in your tax return.
Disposal of a crypto asset takes place when you do any of these things:
- Sell a crypto asset.
- Gift or donate a crypto asset.
- Trade, exchange or swap one crypto asset for another.
- Convert a crypto asset to either Australian dollars or any other foreign currency.
- Buy any goods or services with your cryptocurrency.
To work out the value of your crypto assets when you acquire or dispose of them you will need to convert their value to Australian dollars. It is therefore important to keep all transaction records, along with any tax reports provided by your exchange.
And be aware that the Tax Office do have a “crypto asset data-matching program” that matches what you report in your tax return with data reported to them from designated service providers.
As always, contact us with any queries.
