Crypto assets (crypto) are a digital representation of value that you can transfer, store or trade electronically. This also includes non-fungible tokens (NFTs).
When you buy, sell, or dispose of crypto assets in any other way, you have tax responsibilities.
You need to keep records for every crypto asset transactions.
If you need help understanding how this content applies to you, contact us or speak to a registered tax agent.
You can also read more about crypto asset investments (in English).
Follow these 3 steps to help you manage your crypto asset tax responsibilities.
When you dispose of any crypto asset, you need to consider capital gains tax. 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
- trade, sell, gift or donate crypto assets
- convert crypto to a fiat currency (a currency established by government regulation or law) – for example, to Australian dollars.
Transferring crypto assets from one digital wallet to another digital wallet is not considered as a disposal as long as you maintain ownership of it.
If your crypto holding reduces during a transfer to cover a network fee, the transaction fee is a disposal and has capital gain consequences.
To work out your capital gain or loss, you need to determine the value of your crypto purchases and sales in Australian dollars. A capital gain or loss is the difference between the:
- cost base (cost of ownership, including the purchase price plus certain other costs associated with acquiring, holding and disposing of it)
- capital proceeds (what you receive or the market value of what you receive) when you dispose of your crypto.
- buy crypto using Australian dollars, the amount you paid is included in your cost base (see example 1)
- exchange one crypto asset to another, your cost base is the market value in Australian dollars of the crypto at the time of the transaction (see example 2).
If you have a capital loss, you use it to reduce capital gains you make in the current financial year. If your allowable capital losses are more than your capital gains, you have a net capital loss. You can't deduct a net capital losst against income like salary or wages, but you can carry it forward and deduct it from capital gains in future years.
You need to keep records of all transactions associated with buying, holding and disposing of crypto assets.
To help keep accurate records:
- set up a record keeping system, which can be a simple spreadsheet or you can use professional software
- scan digital copies of your records to make it easier to store and access them.
You need to keep records for at least 5 years after you dispose of any crypto.
You may be able to disregard some capital gains or losses from disposing of crypto assers that are personal use assets.
Crypto assets are a personal use assets if they is kept or used mainly to purchase items for personal use or consumption (see example 3).
Crypto assets are not personal use assets if keep or use them mainly as any of the following:
- as an investment
- in a profit-making scheme
- in carrying on a business.
In most situations, crypto is not a personal use asset and is subject to capital gains.
A capital gain on a personal use asset is not disregarded if it cost more than $10,000 to acquire it.
A fiat currency is a currency established by a country's government regulation or law.
Tim purchased 400 XRP for A$800. A few days later Tim exchanged his 400 XRP for 2 Ether (ETH). Tim needs to report his capital gain or loss from the disposal of crypto (XRP) in his tax return.
Tim's receipt shows he:
- used A$800 to purchase 400 XRP
- was charged A$5 for brokerage.
Tim's cost base is A$800 + A$5, which totals A$805.
Tim's exchange provides a receipt for the purchase of 2 ETH but it doesn't include prices in Australian dollars. According to his exchange records, Tim exchanged 400 XRP for 2 ETH on 25 June 2021 at 1:30 pm.
At the time of this transaction, the market value of 2 ETH was A$900. Tim's capital proceeds is A$900.
Tim subtracts his cost base (A$805) from his capital proceeds (A$900), which results in a capital gain of A$95.
Tim is not eligible for a discount or exemption.
Tim keeps a record of his net capital gain (A$95) to fill in his capital gains in his 2021 tax return.End of example
A few months later Tim exchanged his 2 Ether (ETH) for 0.08 Bitcoin (BTC).
Tim's exchange records show he acquired 2 ETH on 25 June 2021 at 1:30 pm for 400 XRP. At the time of the transaction, the XRP had a market value of A$900.
Tim's exchange charges him an A$10 brokerage fee to trade 2 ETH for 0.08 BTC.
Tim's cost base is A$900 + A$10, which totals A$910.
Tim's exchange provides a receipt for the acquisition 0.08 BTC, but it doesn't include prices in Australian dollars. Tim's receipt shows he disposed of his 2 ETH for 0.08 BTC on 13 July 2021 at 2:00 pm.
At the time of this transaction, the market value of 0.08 BTC was A$1,055. Tim's capital proceeds from the exchange of 2 ETH for 0.08 BTC is A$1,055.
Tim subtracts his cost base (A$910) from his capital proceeds (A$1,055), which results in a capital gain of A$145.
Tim isn't eligible for a discount or exemption.
Tim keeps a record of his net capital gain (A$145) to fill in his capital gains in this 2022 tax return.End of example
Josh pays A$50 each fortnight to acquire crypto assets, all of which he uses in the same fortnight to buy computer games. He doesn't hold any other crypto assets.
In one fortnight, Josh sees a computer game for sale through an online retailer who doesn't accept crypto assets. Josh uses an online payment gateway that accepts crypto assets to buy the game.
Under the circumstances in which Josh acquires and uses the crypto assets, the crypto assets (including the amount he uses through the online payment gateway) are personal use assets. The one-off use of a payment gateway doesn't change the nature of his regular use of crypto assets.End of example
Example 4: investment in crypto, not personal use
Rose buys crypto with the intention of selling at a favourable exchange rate. She decides to buy some goods and services directly with some of her crypto.
Because Rose held the crypto primarily as an investment, the crypto isn't a personal use asset.End of example