Tax-smart tips for crypto asset investments

You may need to include a capital gain or capital loss in your income tax return

If you exchange crypto assets (crypto) for goods, cash or other crypto assets then this is normally considered a disposal for the purposes of capital gains tax.

Make tax time easier by remembering these 3 tips:

Disposal of crypto assets
Calculating capital gains tax (CGT) on crypto assets
Keep records

1. Disposal of crypto assets

You must report a disposal of crypto assets for capital gains tax purposes if you:

exchange one crypto for another crypto
trade, sell or gift crypto
convert crypto to a fiat currency – for example, to Australian dollars (A$).

If you only transfer crypto from one wallet to another wallet while maintaining ownership, it’s not considered a disposal of crypto for tax purposes. If your crypto holding reduces during this transfer to cover the network fee, the transaction fee is a disposal and has capital gain consequences.

You have a CGT reporting obligation even if you:

use the proceeds from selling crypto to buy more crypto
don’t convert the proceeds into fiat currency (for example, A$).

2. Calculating capital gains tax (CGT) on crypto assets

Convert your crypto asset purchases and sales into A$ to calculate your capital gain or capital loss. A capital gain or capital loss is the difference between your:

cost base (cost of ownership – including the purchase price of the coin 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.

If you purchase crypto using AUD, the amount you pay is included in your cost base. If you acquire a crypto asset by exchanging it for another crypto asset, your cost base is the market value in A$ of the crypto you used at the time you purchased the coin.

Note: You can use a current year net capital loss to reduce your future capital gains. Report the loss in your tax return so you have it available for future investments.

3. Keep records

You need to keep records of all your transactions associated with acquiring, holding and disposing of crypto assets. You need to keep records for 5 years after you dispose of your crypto.

Buying (acquiring)

receipts of transactions
documents that display:
- the crypto asset
- the purchase price in A$
- the date and time of the transaction
- what the transaction was for
commission or brokerage fees on the purchase
agent, accountant and legal costs
exchange records

Owning (holding)

software costs related to managing your tax affairs
digital wallet records and keys
documents that show the date and quantity of crypto assets received via staking or airdrop

Selling (disposing)

receipts of sale or transfer
documents that display:
- the crypto asset
- the sale or transfer price in A$
- the date and time of the transaction
- what the transaction was for
commission or brokerage fees on the sale or transfer
exchange records
calculation of capital gain or capital loss

To help calculate any capital gain or loss:

Set up an easy-to-use record-keeping system as a priority. This can be as a simple as a spreadsheet, or you can use professional software.
Scan digital copies of your records to make it easier to store and access them.

Personal use assets and crypto assets

A crypto asset is not a personal use asset if it’s kept or used mainly as either:

an investment
part of a profit-making scheme
while carrying on a business.

In most situations, crypto is not a personal use asset and will be subject to capital gains. However, limited exceptions apply.

Crypto is a personal use asset if it’s kept or used mainly to purchase items for personal use or consumption.

The longer you hold crypto, the less likely we consider it a personal use asset.

Note: Only the capital gains you make from disposing of personal use crypto acquired for less than $10,000 are disregarded for capital gains tax purposes.

Partner with Salisburys on your pathway to success at tax time. Read how here or call our tax team in Albury on 02 6041 3014.