ATO Tax Treatment of Cryptocurrencies

The term cryptocurrency is generally used to describe a digital asset in which encryption techniques are used to regulate the generation of additional units and verify transactions on a blockchain. Cryptocurrency generally operates independently of a central bank, central authority or government.

If you are involved in acquiring or disposing of cryptocurrency, you need to be aware of the tax consequences. These vary depending on the nature of your circumstances.

Everybody involved in acquiring or disposing of cryptocurrency needs to keep records in relation to their cryptocurrency transactions.

If you have dealt with a foreign exchange or cryptocurrency there may also be taxation consequences for your transactions in the foreign country.

The following  that must be observed when dealing in cryptocurrency

  • Transacting with cryptocurrency
  • Cryptocurrency used in business
  • Record keeping for cryptocurrency
  • Additional information
  • Cryptocurrency 2014-15 to 2022-23 data-matching program protocol

A capital gains tax (CGT) event occurs when you dispose of your cryptocurrency. A disposal can occur when you:

  • sell or gift cryptocurrency
  • trade or exchange cryptocurrency (including the disposal of one cryptocurrency for another cryptocurrency)
  • convert cryptocurrency to fiat currency (a currency established by government regulation or law ), such as Australian dollars, or
  • use cryptocurrency to obtain goods or services.

There are numerous areas of the ATO that deal with cryptocurrency and their treatment, please if you are unsure contact us. The areas are as follows:

  • Exchanging cryptocurrency for another cryptocurrency
  • Cryptocurrency as an investment
  • Staking rewards and airdrops
  • Personal use asset
  • Loss or theft of cryptocurrency
  • Chain splits

Cryptocurrency and the tax treatment is becoming more complicated, so you have to be wary and seek professional advice of the tax effects of your dealings and investments in these assets.