Australia is one of the countries in the world which fully embrace cryptocurrencies. The country recognises cryptocurrencies as an asset and thus attracts Capital Gains tax. The Australian Tax Office (ATO) has since come up with clear guidelines on crypto taxations. While the cryptocurrency taxes Australia laws have been in place since 2014, most people are yet to master them. This is mostly due to the changing crypto landscape, which impacts regulations.
Follow through to understand all the basics about the crypto taxes Australia 2021.
How does the ATO know about your crypto transactions?
The Australian Tax Office works with all the Australian cryptocurrency designated service providers (DSPs) for data on all cryptocurrency transactions. Even though the tax agency started collecting the data in 2019, it has access to information dating back to 2014. Therefore, if you are among the 500,000 Australians with cryptocurrency, then the ATO has your crypto information.
The DSPs where the tax office collects the data include all the crypto exchanges, crypto payment processors and Bitcoin ATMs. The data access is possible following the Know Your Customer (KYC) provisions clients accept while signing up for the crypto services.
Some of the data collected from the DSPS include; personal details about the owner of a crypto account and the account details. The tax agency then follows up with taxpayers to ensure compliance. For example, in 2020 more than 350,000 Australian crypto holders received letters informing them to declare crypto assets and pay taxes.
Tax implications on the various crypto activities
Even though buying and selling of crypto remain the most popular crypto activities, other transactions are also becoming common. For each, there are specific tax implications. These include;
- Buying crypto – Buying crypto using AUD or any other fiat currency comes with no taxes charged. However, you still need to declare the transaction details for the purpose of calculating capital gains.
- Selling crypto – Selling crypto at profits comes with a CGT. For example, if you bought a coin worth AUD3000 a year, when you sell at AUD8000, you are obliged to pay a CGT for the amount of AUD5,000.
- Crypto transfers – transferring cryptos from one exchange to another or from an exchange to a wallet does not require you to pay taxes.
- Trading using cryptos – when you buy crypto using another crypto you need to pay taxes. The cryptos value rises over time hence the tax applies for the difference in value.
- Airdrops – airdrops are when you receive crypto from a project promoting itself. The ATO treats it as ordinary income, hence you have to pay the taxes. The tax is based on the value of the crypto given and changes depending on the price changes.
Filing your cryptocurrency taxes Australia
Tax compliance is crucial for everyone in Australia. If you are to file your taxes, you have to indicate all crypto transactions within the financial year running from July 1 to June 30th. This should happen before the end of October if you are handling everything by yourself. However, if you engage a tax professional, then it can run until the end of March.
All your crypto activities must be detailed with accurate information. Include the transaction date, crypto value at the time of the transaction, purpose of the transaction, and details of the receiver or the other party. Also, consider keeping your receipts from the crypto transactions, agent invoices, and wallets records for evidence whenever needed.