It’s no secret that the Australian Taxation Office (ATO) is cracking down on crypto traders, so we’ve put this list of handy tips together so you can go into the tax season feeling confident. This article will outline the most important guidelines to know, strategies to optimise your tax return, and how to streamline the entire process. Let’s dive in!
Crypto is viewed as an asset by the ATO, not as a currency
The first and most important point to establish is that the Australian Taxation Office (ATO) views crypto as an asset, not a currency. In Australia, a capital gains tax (CGT) event occurs when an asset is disposed of. The ATO has listed several transaction types that fall into the definition of a disposal: selling a crypto asset, gifting a crypto asset, trading a crypto asset for another crypto asset, converting a crypto asset into fiat currency, and buying goods or services with a crypto asset. If you’ve participated in any trading activity that falls into this category, you’ll need to report it at tax time. You can read more on how to calculate your capital gains tax here.
Take note of how long you’ve held your crypto
In Australia, assets are subject to 50% less capital gains tax if they’ve been held for a period of longer than 12 months. Crypto falls into this ruling as well, so you could easily reduce your tax obligations by taking purchase timing into account when looking to dispose of your crypto assets.
Bear market? No problem!
Another tip for tax time is to utilise the strategy of tax-loss harvesting. In crypto, this strategy is played out by investors who sell their assets at a loss to offset the amount of capital gains accrued in the financial year. Right now, it’d be quite easy for a lot of us to offset our assets at a loss with the state of the market. If you’ve got capital gains to account for, this is definitely a strategy to consider.
Note: The ATO has a wash sale rule to dissuade investors from gaming the system. Capital losses as a result of matching transactions during a 61-day period (30 calendar days before the sale and 30 calendar days after the sale) can’t be claimed and/or offset against any capital gains. Keep this in mind!
NFTs aren’t immune to taxes
NFTs… the assets that have taken the crypto world by storm over the past year or two. Unfortunately, while they’re usually more visually appealing than your standard crypto asset, this doesn’t make them immune to the ATO’s tax rulings. The ATO has stated that the tax treatment of NFTs follows the same principles as cryptocurrency. This means that NFTs are treated as assets, and so the following activities will trigger a CGT event: selling NFTs in exchange for crypto, exchanging one NFT for another NFT, or giving an NFT as a gift.
Don’t do it the hard way, use crypto tax software!
As you can imagine, manually keeping records of each and every crypto transaction you’ve made for tax purposes would be an insanely tedious task… which is why we’re lucky that crypto tax software like CryptoTaxCalculator exists! A crypto tax software’s goal is to help make calculating your tax obligations on your crypto activity much easier. CryptoTaxCalculator in particular helps reconcile transactions from centralised exchanges, DeFi protocols, NFT marketplaces - you name it. Try it out today with their free trial!
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