Australian tax planning - Bitcoin

Australian tax planning – Bitcoin & cryptocurrencies

In recent times cryptocurrencies such as Bitcoin, Ethereum, Litecoin and Ripple have seen huge rises. However, they have also seen plummeting drops. The cryptocurrency market can be a wild ride and you might be thinking that it’s time to get off and cash out, but you are probably also wondering how you will be taxed.

Trading in cryptocurrency can be extremely complicated, which is why we have put together a summary on tax planning for bitcoin and other cryptocurrencies, to simplify the process for you.

Be aware of changes

Until the end of 2017, for the purpose of tax, cryptocurrencies were not considered to be an official form of currency by the Australian Tax Office. However, the ATO has recently made some updates to ensure that investors and traders are meeting their tax responsibilities.

Cryptocurrency is an asset

According to the Australian Taxation Office, transacting with cryptocurrencies is the same as bartering and has similar consequences when it comes to tax. While the ATO still do not view cryptocurrency as ‘money’ or ‘foreign currency,’ they do consider them to be an asset when it comes to capital gains.

Capital gains tax

If you have acquired cryptocurrency as an investment, capital gains tax applies. When you sell your cryptocurrency, the profits you make will be considered assessable income by the ATO.

Taxable profits

If you’ve purchased cryptocurrency for the purposes of short-term trading/day-trading, be aware that your profits will NOT be treated as capital gains.

This means that 100% of your profits will be assessable as ordinary income and will be taxed at your marginal tax rate (potentially up to 49% including the Medicare Levy and the Temporary Budget Repair Levy). Any cryptocurrency losses that you incur will be deductible however (in the year that you made the loss).

Don’t get caught out

Make sure you aren’t caught out when it comes to tax time. With cryptocurrency trading continuing to grow in popularity, audits are likely to take place. Make sure you keep detailed evidence of all your transactions! The tax office has warned that it will be looking out for crypto tax dodgers stating: “The ATO is here to help those that are genuinely trying to meet their tax obligations, however, where people attempt to deliberately avoid these obligations, we will take strong action.”

It is still a common misconception that cryptocurrency profits are tax free. Wherever you are in the world, make sure you stay up to date with changes to the way that cryptocurrencies are taxed in Australia, and plan accordingly.

If you need any assistance with tax planning for your cryptocurrency, contact Expat Tax Services today for friendly advice and services.

Source: Tax treatment of crypto-currencies in Australia – specifically bitcoin

Shane Macfarlane
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Shane Macfarlane

CEO & Founder at Expat Tax Services
Shane's an Australian Chartered Accountant and Australian expat tax specialist who's also an expat himself (based in Asia).Shane's passionate about tax and legitimate tax minimisation, particularly as it relates to Australian expats who are often subject to high rates of tax back home in Australia.Beyond tax and accounting, Shane's an entrepreneur, having devised, created and founded a successful accounting startup, Fifo Workpapers (acquired by accounting software giant, Intuit inc. in 2013)

In short Shane's a tax and software techno-geek, who recognised that Australian expats were unable to obtain the specialist advice and quality service, that they needed from their accountants. Accordingly, Shane founded Expat Tax Services to provide Australian expats with access to specialist, quality advice at fair and reasonable prices (no hourly rates, fees quoted upfront with unlimited support included) . . . receive the support and advice you need without having to take second-mortgage to pay your accountant's bill! Speak to Shane & the team today.
Shane Macfarlane
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