Crypto tax guide 2022
If you are wondering how to pay taxes on cryptocurrency in Australia, then you have landed at the right place. Cryptocurrencies like Bitcoins attract Income Tax and Capital Gains Tax in Australia. In this article, we are going to cover all that you need to know about taxes on crypto in Australia.
Crypto is taxed in Australia!
Australian government considers cryptocurrency as an asset, and so it attracts capital gains tax and Income tax. You should understand the consequences of owning crypto when it comes to taxes. If you have bought, sold, or earned interest from digital currency, then you need to declare the crypto totals in your Income Tax returns in Adelaide.
If you have an account in Australian Cryptocurrency DSPs, then your data is already with ATO. The ATO has data-sharing provisions with exchanges in Australia. In addition, ATO has the KYC information that you gave while opening an account with any crypto exchange. So, ATO will know when you transact in cryptocurrencies. When you fail to declare your transactions, you may have to face penalties for tax invasion.
How are cryptos taxed?
The Australian government considers cryptocurrency as property or assets, so it is taxed as Income Tax or capital gains tax. ATO has different rules for individual investors and taxpayers who make a regular income from trading. Similarly, a crypto owner is either a trader or an investor. Here is a difference between an investor and a trader:
- Investor – An investor is an individual who invests for the future return. An investor buys and sells cryptos to build his wealth over time. Most Australian crypto users come under this category, and the profits gained are subjected to capital gains tax. In a few cases, income tax may also be applied depending on the way digital currency was acquired.
- Trader- The trader is active in selling and buying cryptos to generate a regular income, and he operates from a business setup. If you have a business mining cryptos or you run a crypto exchange, then you would be considered a trader, and the proceeds are taxed under income tax. One point to note here is that investors can avail 50% discount on Capital Gains tax while traders cannot do so.
Capital Gains tax
You have to pay capital gains tax when you sell, gift, trade, convert, exchange or buy things from cryptos. One important thing is that if you hold cryptos for one year before disposing of them, then you will pay 50% less tax on the gains from cryptos. You will have to pay capital gains tax when:
- You sell crypto for fiat
- Exchange crypto
- Buy things with crypto
- Gift crypto
Capital Gains tax rate
If you are an investor, then you will pay the same percentage of capital gains tax as the income tax rate. Your income tax rate depends on your total income during the year you are filing your taxes. Capital gains tax is the same class of asset as a share. The gain can be calculated by deducting the price at which you got your crypto and the price at which you sold it. You will attract capital gains tax when you gain profit from buying and selling the crypto. This also includes the purchase price and the additional fees that you paid for acquiring or disposing of your crypto, like the transfer fee.
If you have gained profit when you dispose of cryptocurrency, then you will need to pay taxes on one or all of the gains.
The Australian government allows its taxpayers to enjoy some tax-free thresholds and allowances:
- You can start to pay income tax when you hit $18,200 of income during the tax year.
- You get a 50% CGT discount when you hold your cryptocurrency for more than a year. In addition, you only have to pay taxes when you dispose of your holding, and it has nothing to do with the changes in the market value of the crypto.
- You can get an exemption from taxes if you declare that the cryptocurrency that you are holding is a personal use asset. When you buy crypto of less than $10000 to buy something for a short period of time, then you can avail such an exemption.
You should use this provision with caution, as when you are investigated by ATO, the burden of proof falls on you, and you need to show if crypto was used as a personal use asset.
Stolen or lost crypto
When you lose your private key, and your cryptos are stolen, you can claim a capital loss. However, you need to provide some evidence like wallet address and other details.
If you are facing trouble in filing your tax returns, then you can avail oftaxation Services in Adelaide as they can guide you and help you with your taxes in a professional manner.