Cryptocurrencies are becoming pretty popular each day. In 2021, as per reports, 0.9 million people in Australia had some cryptocurrency holding. Out of these, 80 percent were inclined to use crypto for payments and transactions.
As their popularity grows, so does the requirement and need for clarification on how they are taxed. This blog post will help understand how cryptocurrency is taxed in Australia.
This post will also answer some of the most common questions related to crypto taxation in Australia. By the end of this article, you will understand crypto tax in Australia; and get a better understanding of how your crypto transactions are taxed!
Cryptocurrency in Australia
When it comes to cryptocurrency, Australia has a progressive approach. The country was one of the first to recognize Bitcoin as a legitimate currency back in 2013. Since then, the Australian government has been working on providing clear guidelines on how cryptocurrencies should be taxed. Furthermore, the government has also invested in blockchain technology and is actively supporting startups working on innovative technology applications.
Cryptocurrency Uses in Australia
In Australia, you can use cryptocurrency for:
-Paying for goods and services
-Transferring money overseas
-Receiving payments from overseas
If you sell your crypto for AUD or another currency, you will need to pay capital gains tax on your profits. If you use crypto to pay for goods or services, you will need to pay GST. And if you receive payments in cryptocurrency from overseas, you may need to pay income tax.
As of now, there is no clear law that governs cryptocurrency taxation in Australia. However, the Australian Taxation Office (ATO) has released some guidance on taxing crypto transactions. According to the ATO, cryptocurrencies are considered property for tax purposes. Any gains or losses made from buying, selling, or trading cryptos will be subject to capital gains tax (CGT).
Importance of Crypto Tax
Crypto tax may seem like a new and daunting concept, but it’s pretty simple. Cryptocurrencies are held in digital wallets and can be bought, sold, or traded on exchanges. You may incur a capital loss or gain when you buy, sell, or trade cryptocurrencies. These gains and losses must be reported to the ATO.
Crypto taxes are significant because they help ensure that people pay their fair share of taxes on their profits. People are essentially cheating the system and not contributing to the public good by not paying crypto taxes.
In addition, crypto taxes help to prevent money laundering and other illegal activities associated with cryptocurrencies. Overall, crypto taxes are essential for ensuring that the Cryptocurrency market is fair and equitable for everyone involved.
How to Pay Crypto Tax?
If you are an Australian resident, you will need to pay CGT on any crypto assets that you dispose of. This includes selling, exchanging, or transferring your cryptos. You will only have to pay CGT if you have made a profit from disposing of your crypto assets. The ATO considers any disposal that results in a capital gain to be taxable.
When it comes to calculating your gains, you will need to consider the AUD value of your cryptos at the time of disposal. For example, let’s say you bought Bitcoin worth $500 and sold it when it was worth $1000. This means that you made a capital gain of $500.
If you are disposing of your crypto assets for personal use, you will not be subject to CGT. However, if you are disposing of your cryptos for investment purposes, you will need to pay CGT.
When paying taxes on your crypto profits, you will need to self-assess your capital gains. You will need to declare your crypto profits on your annual tax return. You can complete this by using the ATO’s services or lodging a paper return.
If you are unsure about calculating your capital gains, you can use the ATO’s Capital Gains Tax Calculator. This will help you find out your capital gains for the 2017-18 financial year.
What If You Don’t Pay Crypto Taxes?
If you don’t pay your crypto taxes, you may be subject to penalties from the ATO. These penalties can include interest charges, fines, and even jail time. In addition, the ATO may also freeze your assets or seize your property.
Paying your crypto taxes is essential, so be sure to stay up to date on the latest tax laws and regulations. Furthermore, if you are ever unsure about how to report your crypto taxes properly, be sure to seek out professional help. Always understand crypto tax in Australia before taking any step.
So, that’s how crypto taxes work in Australia! Hopefully, this blog has clarified any uncertainty you may have had about cryptocurrencies and taxation.