Australian Taxation Office aka ATO has certain guidelines about cryptocurrency taxation on their website and is available to the public. They have explained various scenarios around trading, investing in cryptocurrencies by taking the popular cryptocurrency Bitcoin as an example.
Bitcoin is neither considered money nor Australian currency or any other foreign currency. It’s considered as an asset and is subject to capital gains tax (CGT). Not just Bitcoin, all other cryptocurrencies like Bitcoin are considered the same for tax filing.
A CGT is applicable when you sell your cryptocurrency. However, all your holdings must be mentioned in tax filing to avoid any issues.
You pay tax only when you sell and not just buy and hold.
Few types of transactions for CGT calculation are as follows
Cryptocurrency is not a personal use asset if it is acquired, kept or used:
If a furniture shop is offering 20% discount when paid in cryptocurrency, Dave pays $500 to acquire necessary amount of Bitcoin and pays for his dining table on the same day. Given the circumstances where Dave bought and used Bitcoin, it is considered as a personal use asset and do not attract any taxes.
While trading cryptocurrencies, it is common to get involved in analysis, news and memes — but it’s important to keep a record of all trades you do and their buy and sell amount and costs. Few things to be recorded are
Don’t worry, There are tools like BearTax which can connect with all your exchanges and consolidate your trades with their timestamp and price at that timestamp. If you have few deposits done by your friends or paid for goods and services you’ve offered — they can be reviewed and provided with proper sources to calculate cost basis (price in AUD at that time of transaction)
BearTax actually cuts down your effort as an individual or a chartered accountant by a ton of hours. You could do all the consolidation, review and calculation in minutes.
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If you receive Bitcoin for goods or services you offer or provide as part of your business, you need to include the value of the Bitcoin in Australian dollars as part of your ordinary income. This is the same process as receiving any other non-cash consideration under a barter transaction.
One way to calculate the value of Bitcoin accepted in Australian dollars is to use tools like BearTax and provide the timestamp according to the date received and it will calculate automatically using price at that timestamp.
One of the biggest questions in taxation space while trading cryptocurrency is whether buying one cryptocurrency with another one is considered taxable or not.
Answer: IT IS TAXABLE
Australian Taxation Office (ATO) has specifically mentioned that while exchanging one cryptocurrency to another one, it means that you are selling the first cryptocurrency and buying a second one.
Those were the guidelines mentioned on ATO’s treatment of taxes on trading cryptocurrencies.
At every step, it’s clear that you need to
At BearTax, we help with the daunting and time-consuming steps from 1-4 and provides you with the information needed in the CGT section for filing taxes. Visit us at https://bear.tax and if you have any questions, please contact us using the chat box at the bottom of the page.