Taxing the crypto world

03 February 2023

More than a million Australians now own at least one cryptocurrency. Despite its elusive status as an unregulated and decentralised asset and numerous warnings about its volatility, it does not escape the reach of the Australian tax authority.

With its cryptocurrency data matching program, the Australian Taxation Office has been able to keep track of any cryptocurrency transactions since 2019. Whether you have been a regular trader of cryptocurrency or just made a one-off sale, it is likely you will see these details appear on your ATO pre-fill report when you log into your personal myGov Account. Therefore, it is important to understand your tax responsibilities.

Investor vs Trader

The ATO has laid out different tax rules for investors, and for taxpayers who earn regular income from trading in cryptocurrency.

An investor holds cryptocurrency as a stock over an extended period with the aim to build wealth through profit made from long term capital gains. Majority of Australian users fall in this category. Thus, any profits earned, or losses incurred will be subject to capital gains tax (CGT). Selling, buying, trading, or exchanging to another cryptocurrency will trigger CGT.

On the upside, where the investor is an individual they will pay 50% less tax on crypto gains if held for one year or more before disposing. Any capital losses will only be able to be offset against future capital gains ( derived from any asset class)  rather than being be able to be claimed against other types of ordinary income.

A trader is one who actively generates income from cryptocurrency, and functions as a business. In other words, there is an intention and purpose to generate profit from purchase and sale of cryptocurrency. Traders often have business plans, strong record-keeping, and a very high quantity of trades. For this purpose, the disposal will be treated as income and taxed at marginal income tax rates and not relevant for CGT.

If you are earning income by running a crypto-trading exchange, mining business or regular buying and selling for short term gains, the ATO will consider you a trader.

Personal use assets

One of the common misconceptions taxpayers  have about this exemption is that cryptocurrency valued under $10,000 are not taxable. The ATO considers cryptocurrency as a non-personal use asset if it were held or used:

  • As an investment;
  • Intention to making a profit; or
  • Carrying on a business.

The personal use asset exemption only applies in rare circumstances where cryptocurrency was purchased and used or disposed of immediately to purchase personal goods or services.

Furthermore, the ATO will regard cryptocurrency as a hobby if the individual can demonstrate that the digital currency was acquired for a personal technological interest rather than profit-making purposes. However, given the nature of the cryptocurrency, it is difficult to persuade the Commissioner that digital currencies are obtained as a hobby.

The longer the cryptocurrency are held, the more likely the ATO will classify it as an investment.

Loss or stolen private key

In some situations where the cryptocurrency private key is lost or stolen, a capital loss can be claimed on the value of the digital currency. The ATO provides detailed information on what proof you may need to justify claiming a tax loss:

  • When the key was acquired and lost;
  • The wallet address that the key relates to;
  • The cost incurred to acquire the lost or stolen digital currency;
  • The amount of cryptocurrency at the time the key was lost or stolen;
  • The wallet was held by you;
  • That you own the hardware that stores the wallet; and
  • Transactions to the wallet from a digital currency exchange for which you hold a verified account or that is linked to your identity.

Cryptocurrency and Fringe benefit tax

If your business pays an employee using cryptocurrency as a salary sacrifice, then the payment would be classified as a fringe benefit. Where there is no salary sacrifice arrangement, the payment would be classified as salary or wages and PAYG withholding taxation on the value that is calculated in AUD will apply.

Record keeping

Maintaining accurate records of any cryptocurrency transactions will help you stay ahead of your tax obligations.

A key challenge we have experienced is translating the sometimes-complex technical language and extracting data into a functionable format. 

Record-keeping includes noting:

  • Transaction date
  • Cryptocurrency value (in AUD) on the date of transacting
  • Transaction purpose and trading party details

Board of Taxation review of the tax treatment of digital assets and transactions

The Government has tasked the Board of Taxation with undertaking a review into the appropriate policy framework for the taxation of digital transactions and assets in Australia, including crypto assets.

The review was to be completed by 31 December 2022.

It is contemplated that the review will consider the:

  • current taxation treatment of digital assets & transactions in Australia, and emerging tax policy issues,
  • taxation of digital assets and transactions in comparative jurisdictions and how international experience may inform the taxation of digital assets and transactions within Australia, and
  • possibility of changes to Australia’s taxation laws and/or their administration, and what those changes should be in the context of digital assets and transactions, both for retail and wholesale investors.

We will keep you abreast of the outcomes of this review but in the meantime the ATO guidance in determining any tax liability should be adhered.

Next Steps

Blockchain is a continuing area of development which are challenging traditional laws.

From our wealth of experience in revenue tax law we can provide advice on the following areas of cryptocurrency:

  • the income tax treatment of cryptocurrency transactions;
  • applications for private binding rulings regarding the appropriate income tax treatment of cryptocurrency dealings;
  • advice on the GST implications when trading cryptocurrency and transacting in cryptocurrency.

Stay ahead by contacting the authors of this article to understand your tax implications pertaining to your crypto transactions.


Michelle Saunders
Managing Director
Head of Strategy

Maria Adisa
Taxation Advisor

This newsletter is current as of 03 February 2023, however, please note that announcements and changes are being made by the Government and the ATO regularly, and we expect that the tax and business-related responses will continue to evolve.  Before acting upon the content of this newsletter, please contact us to discuss how the above applies to your specific circumstances.

This information is general advice only and neither purports, nor is intended to be advice on any particular matter.
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