Cryptocurrency & Tax

Investing in cryptocurrencies?

You may have recently invested in some cryptocurrencies through curiosity, or you may be a serious long-term investor in ‘crypto’. Cryptocurrencies come in many forms, with popular mainstream currencies including Bitcoin, Ethereum, Cardano, Dogecoin and more. But have you been keeping up to date on your Australian tax obligations on cryptocurrencies?

Cryptocurrencies today are a far cry from the ‘wild west’ they were several years ago, as the technology comes increasingly into the mainstream and governments around the world see how it is being used as an investment medium to generate wealth.

Cryptocurrency is squarely in the ATO’s sight!


Are you investing or trading?

You may already be familiar with share or forex trading and investments. Crypto-currencies are a similar form of investment and are taxed as such. This means how you will be taxed in Australia depends on whether you are an ‘investor’ or a ‘trader’.

Do you know which category you are in?

A commonly held misconception is that cryptocurrencies are taxable only when it is sold and cashed back into dollars. The fact is that a taxable gain or loss can be realised even when you swap one form of currency for another, or gift it to someone. Such gains are usually as determined by reference to the market value of the currencies in AUD, at the time of the swap.

Did you know? Different tax consequences also applies for currencies gained through ‘Forking’ or ‘Airdrop’ transactions.

How would they know?

The ATO has data sharing arrangement with all Australian-registered coin exchanges and are actively checking your cryptocurrency transactions.

Even if you trade using an overseas-based coin exchange, information will still be available to the ATO through:

  • Information provided to ATO’s request-for-information
  • Information provided to overseas regulatory authorities that shares information with Australia
  • Information based on monies traced back into your Australian bank account
  • Information from third-parties that you may transact with

The ATO has recently sent some 350,000 notices to taxpayers whom are believed to have transacted cryptocurrencies. Did you or someone you know receive an ATO notice?

Penalties for failure to report cryptocurrency income applies as would for any other income regardless of source or whether there were any actual gains made in real money.

Don’t get caught by not by reporting your ‘crypto’ activities – “They’re going to know! “



Let Prosperity Advisers help you navigate your investments and taxes

If you have large amount of cryptocurrencies or if you frequently trade different cryptocurrencies,  the taxable gains or losses may be very complex to calculate. 

If you are a professional trader in cryptocurrencies, different tax rules may also apply.

To discuss any taxation concerns you have regarding cryptocurrencies please contact Director of Taxation, Paula Tallon at ptallon@prosperity.com.au or Manager of Taxation, Charles Yuan at cyuan@prosperity.com.au.