Do I Have to Pay Tax on My Cryptocurrency Earnings in Australia?

With tax time quickly approaching (it’s June 30), and cryptocurrency holders wincing at the recent crash across major coins, Australians who are new to crypto may be wondering how much tax they’ll have to pay — if they were lucky enough to make a profit, that is.

“There is a common misconception that cryptocurrency is ‘untraceable’ or ‘flies under the radar’ of authorities,” says Bill Tsouvalas, founder and managing editor of Australian financial institution, Savvy. “In theory, this is correct — but ongoing integration into the broader financial system means crypto exchanges have been brought under tighter oversight and regulation by government, and Australia is no exception.”

So, the question is: do you need to pay tax on any crypto gains? Tsouvalas answers that question and others below. Also, for the official word on tax on crypto, be sure to check the ATO’s website.

Do I Have to Pay Tax on Cryptocurrency in Australia?

“Do you buy with bitcoins? Exchange Ethereum? Throw Doge coins a bone? If you do, you may be wondering if the government is watching your back, rubbing its hands, and waiting to come in and swoop their share.

According to a recent study, 17.3% of Australians already owned some form of cryptocurrency. With so many exchanges buying, selling, staking, forging (uhh), and airdropping (we swear we aren’t making these words up) crypto, the crusty old ATO must be salivating at the thought of getting their sweaty digital hands on this digital currency.

“So, do you have to pay tax on cryptocurrency in Australia? The short answer? Yes.

“The longer more detailed answer? Cryptocurrency will be taxed when swapped, spent, or sent as a gift to someone else. However, it won’t be taxed if you use it expressly for personal purchases or donations.”

Hang on, I Thought Cryptocurrency Was Anonymous?

“When it comes to two independent addresses or wallets swapping currencies back and forth, unless you know the real-life ID of the wallet holder, it is for all intents and purposes, anonymous.

“However, crypto exchanges that operate in Australia, known as Designated Service Providers or DSPs, are required to gather customer information much like a bank or lender. This is a condition of doing business under the various regulators.

“If you’ve ever used a DSP — like Coinbase, Binance, Crypto.com, or Swyftx — the ATO already knows how much you’re holding, who you’re sending it to, and so on. They’ve actually known as far back as 2014.

“The ATO has already sent out threatening letters to crypto holders — and if you haven’t got one yet, it’s likely you will.”

Ugh, Fine – So How Much Do I Owe?

“For personal holders or traders, you will be taxed according to the Capital Gains Tax schedule in Australia. CGT is calculated using the income tax schedule. It doesn’t include the Medicare levy of 2%.

Of course, this is tax we’re talking about, so it’s actually a lot more complicated.”

How Do I Calculate Tax on My Crypto?

“To calculate the tax on your crypto, you’ll need to calculate your pre-tax cost basis for the crypto. That means how much it cost to acquire and hold the crypto.

“Therefore, if you bought $20,000 of crypto and paid a $200 fee, your cost basis is $20,200.

“Let’s say your crypto makes an extra $20,000 and your entire portfolio is worth $40,000. To cash out your entire portfolio carries a $400 fee. So, your cost basis is $20,600.

“The gain is how much you have total ($40,000) minus the cost basis ($20,600) which means you made a gain of $19,400.

“If you keep your crypto for at least a year before disposing of it, you get a 50% tax discount – so only $9,700 would be taxed. In this scenario, you wouldn’t pay any tax as it’s under the tax-free threshold.

“As for your impulsive self above, you would need to pay 19% in every dollar above $18,200, which means you owe the tax office $228.”

When Don’t I Have to Pay Tax on Crypto?

“When you are using crypto to pay for personal purchases or donations. That means converting your regular money into crypto because your favourite online retailer that sells S-Rank Gunpla only takes Dogecoins. For some reason.”

What If I’m a Business?

“If you’re a business and your main business is trading crypto, cryptocurrency transactions are taxed using trading stock rules, and not the capital gains tax rules.

“If your business takes crypto as payment, you’ll have to account for the crypto as ordinary income in Australian dollars in your activity statements.”

How Do I Keep on Top of All This Tax Stuff?

“Unless you’re some kind of egghead, the same way most of us do: using some kind of tax calculator or accounting software.

“Crypto.com Tax, CoinTracker, Koinly, Taxbit, and many others can connect to your wallets and help you calculate your tax obligations on crypto — some of them using real time crypto to AUD prices. This can make tax time much, much easier.”

Should I Buy Crypto?

“That’s up to you. With crypto still being quite volatile (Bitcoin lost about 20% of its value in May 2022) you could make a shed load of money — or lose the shirt off your back. Like anything financial, it’s best to talk to a professional first before investing in anything.”

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