How much tax do you pay on cryptocurrency?

Capital gains tax isn’t charged at a separate rate to income tax. Instead, any capital gains you make from crypto assets are taxed at the same rate as your income for the financial year.

So the amount of tax you pay on cryptocurrency in Australia depends on your individual income tax rate. Of course, don’t forget that a 50% CGT discount applies to investments that you’ve held for at least a year.

Can I avoid paying crypto tax?

You may be eligible for the personal use asset exemption. Cryptocurrency transactions are exempt from CGT if:

  • The crypto is used to purchase goods or services for personal use, such as booking hotels online or shopping at retailers that accept digital currency; and
  • The capital gains you make are from personal use assets acquired for less than $10,000.

But there are a few terms and conditions that apply. The ATO explains that cryptocurrency is not classed as a personal use asset if it is acquired, kept or used:

  • As an investment
  • As part of a profit-making scheme
  • In the course of business activities

The ATO also states that if you hold cryptocurrency for some time before using it to buy items for personal use, it’s “less likely” to be classified as a personal use asset. In other words, the longer you hold your crypto before spending it, the smaller your chances of qualifying for the personal use asset exemption.

You also may not be able to take advantage of the exemption if you need to use a payment gateway or bill payment service to purchase the items on your behalf, so check the ATO’s fine print carefully before deciding whether you can avoid CGT.

What cryptocurrency tax records do you need to keep?

It is important to keep proper records of all your crypto-related transactions – the ATO allows the use of software to help meet record-keeping obligations.

Records you should keep include:

  • The date of each transaction
  • The value of the cryptocurrency in Australian dollars at the time of the transaction
  • The purpose of the transaction
  • The details of the other party involved (even if it’s just their crypto wallet address)

For example, if you want to claim the personal use exemption, you’ll need to be able to prove that you used your cryptocurrency to buy an item or service for personal use.

The ATO outlines examples of the records you should keep, such as:

  • Receipts of cryptocurrency purchases or transfers
  • Exchange records
  • Records of agent, accountant and legal costs
  • Digital wallet records and keys
  • Software costs associated with the management of your tax affairs

If you have not kept records of your tax, you can access historic price information from reputable websites that publish daily conversion rates for BTC/AUD, ETH/AUD etc. Your crypto exchange should also be able to provide you with details of your transaction history.

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