If you have bought, sold, swapped, staked, mined, gifted or been given cryptocurrency, you need to know how these activities are taxed in Australia. It depends on your crypto use and whether your activity is considered investment or business.

In most cases, crypto is treated as a capital gains tax (CGT) asset. You may trigger a CGT event if you originally acquired crypto as an investment and later dispose of it by selling, swapping or using it to purchase goods or services. If you have held the assets for over twelve months, you may be eligible for a 50% CGT discount.

Your activity may be considered business income if you actively trade crypto, buy and sell frequently, use automated trading bots, or engage in decentralised finance. In that case, profits are taxed as ordinary income, and losses may be deductible. However, the Tax Office considers the threshold for being classified as a trader high. Consider factors such as the scale of activity, commercial intent, and whether the activity is business-like. Having many transactions or a profit motive might not be enough for them.

Cryptocurrency is not considered foreign currency after a 2020 Tribunal decision, which confirmed that, since Bitcoin is not issued by a government, it does not qualify, and foreign exchange rules do not apply.

The Tax Office has decided that some businesses using crypto arbitrage bots or engaging in high-volume trading do not fall under the so-called Taxation of Financial Arrangements rules. These rules are complex and only apply in specific circumstances, such as when financial arrangements are made for extended periods or involve derivative contracts. Similarly, the Tax Office still treated a partnership that registered an ABN and traded regularly as an investor, not a business, because it apparently lacked the scale and planning expected of a commercial operation.  

The Tax Office says it monitors crypto activity and has been collecting data from crypto exchanges since 2019. It also says it runs a data-matching program covering the 2023 to 2026 tax years. This program is designed to identify taxpayers who have not reported crypto disposals in their tax returns.

If you hold cryptocurrency, move overseas, and stop being an Australian tax resident, you may face a "deemed disposal" for capital gains tax purposes. This means you will be treated as though you have sold your cryptocurrency at its market value on the day you cease to be a resident, even if you still hold the asset. Any capital gain resulting from this deemed disposal may be subject to tax on your final Australian tax return.

However, you can defer this tax by treating the asset as still being held. In this case, the crystallisation of a gain or loss will be deferred until you sell the asset. You should make this election when you prepare your tax return for the year you cease residency, and ideally, record it there.

Keep in mind that crypto transactions are not anonymous, and exchanges are required to report data to the Tax Office, every disposal of crypto, including swaps and gifts, may be a taxable event, accurate record keeping is essential, including dates, values in Australian dollars, transaction details and wallet addresses, and the way you structure your crypto activity, whether as an individual, or through a company, trust or self-managed superannuation fund, can significantly affect your tax position.

If you have crypto, seek a tax practitioner’s advice on how to report sales. Specialised crypto accounting software can help. Consider specialised professional advice on the best structure and tax treatment for more complex trading.  

‍

‍