As the popularity of non-fungible tokens (NFTs) continues to rise, many Australians are taking an...
What is Cryptocurrency?
Cryptocurrency is a type of digital or virtual currency that uses cryptography for security and operates independently of a central bank or government. It is decentralised, meaning that it is not controlled by any single entity or authority. Transactions in cryptocurrency are recorded on a decentralized digital ledger called a blockchain.
Cryptocurrencies such as Bitcoin, Ethereum, and Litecoin are some of the most well-known examples. These currencies can be used to buy goods and services, or they can be traded on cryptocurrency exchanges for other currencies or for fiat money.
What are my Tax Obligations?
1. Keep accurate records: The first step in managing your crypto asset tax responsibilities is to keep accurate records of all your transactions. This includes details such as the date of the transaction, the amount of cryptocurrency involved, the value of the cryptocurrency in Australian dollars at the time of the transaction, and the purpose of the transaction.
2. Understand your tax obligations: It is important to understand your tax obligations as they relate to your crypto assets. In Australia, cryptocurrencies are considered property for tax purposes, and any profits made from buying and selling cryptocurrencies are subject to capital gains tax (CGT).
3. Calculate your CGT: To calculate your CGT, you need to work out the cost base of your cryptocurrency and the proceeds from the sale or disposal of the cryptocurrency. The difference between the two is your capital gain, which is subject to CGT. Please note that exchanging one cryptocurrency for another counts as a sale or disposal for CGT purposes.
4. Lodge your tax return: You must include any capital gains or losses from your cryptocurrency transactions in your tax return. This includes any gains or losses from the disposal of your cryptocurrency. Any staking income received will also need to be reported.
Managing your crypto asset tax responsibilities requires accurate record-keeping, an understanding of your tax obligations.
Seek for professional advice and ongoing attention to changes in tax laws and regulations will ensure that you are meeting your tax obligations and managing your crypto assets effectively.
This blog has been prepared for the purposes of general information and guidance only. It should not be used for specific advice or used for formulating decisions under any circumstances. If you would like specific advice about your own personal circumstances, please feel free to contact us on 02 9411 5422. We can help make sure the right method is used to give you the maximum possible tax deduction associated with any of these methods.
