Crypto Tax in Australia: A Guide For 2024

Yes, you have to pay crypto tax in Australia - eventually. But the good news is that the Australian Tax Office (ATO) is pretty proactive about it. They work with many cryptocurrency platforms to ensure you’re declaring your crypto-related income properly. And we’re here to give you a crash course so you don’t get hit with a big unexpected bill. Let’s unpack how Australian crypto taxes work and how to report your activity properly.

Can The ATO Track Crypto Wallets?

Not to scare you but, the Australian Tax Office (ATO) probably already knows about your crypto activity. They’re pretty good at keeping track of digital asset transactions on regulated exchange platforms. 

So if you were planning to evade taxes by not declaring your crypto, you’re going to have a bad time. The ATO isn’t exactly watching your specific wallet with binoculars, but they've got some nifty techniques to make sure people aren’t evading taxes.

AUSTRAC-registered platforms are legally required to report account information and transaction data to the ATO. So, when you buy, sell, or trade crypto, there's a good chance the ATO knows about it. Then they use something called data-matching to shift through heaps of data to find discrepancies between what you report and what the crypto exchanges report to them.

And contrary to popular belief, the blockchain is not as anonymous as you think it is. While your personal information is not visible, on-chain data can be used to trace transactions back to specific wallets. In some cases, the owner of a wallet can be identified, especially on regulated platforms.  

How the ATO Defines Crypto & Taxes Users

The ATO doesn't classify cryptocurrency as a form of money or a medium of exchange. Instead, they consider it property. That means your crypto and other digital assets are subject to either Capital Gains Tax (CGT) or Income Tax.

How you engage with crypto dictates how it’s taxed, or if it’s taxed at all (more on that later). It really boils down to whether you’re an investor or an active trader. Investors are more likely to pay CGT, while active traders are more likely to pay Income Tax. Here’s how the ATO distinguishes between the two:

How Common Crypto Transactions Are Taxed

Investors aren’t typically taxed for buying and holding cryptocurrency. A taxable event is triggered when you dispose of it, such as selling it for AUD or swapping it for another coin. 

Active traders and people who get paid in crypto are taxed on earnings, even if they don’t dispose of it. Below are the most common types of crypto transactions and the type of tax they’re subject to:  

DeFi Tax Can Get Complicated

Decentralized Finance, or DeFi, is a relatively new and evolving area that broadly falls under the existing crypto tax laws. Income earned through DeFi platforms, like interest from lending and staking activities or rewards from liquidity pooling, is typically considered income by the ATO. The same is true for yield farming, staking, and any other DeFi-related earnings.

The moment you receive interest or rewards from DeFi platforms, it's taxable. You need to calculate the Australian Dollar (AUD) value of your DeFi earnings at the time you receive them. This value is then added to your total income and is subject to income tax at your marginal rate.

If you later dispose of the tokens or crypto assets you've earned through DeFi activities, any increase in their value from the time you received them until the time you dispose of them may be subject to Capital Gains Tax (CGT).

Given the volatility and liquidity variations in DeFi platforms, determining the exact AUD value of DeFi earnings can get complicated. Transaction fees, including Gas fees on the Ethereum network, may also have tax implications. These fees can sometimes be claimed as a cost base in CGT calculations or as an expense against income, depending on the context of the transaction.

If you engage with DeFi platforms, especially if it is substantial or complex, consider working with a tax professional with crypto experience. This could save you considerable time, money, and stress given the complexity and the rapidly changing nature of DeFi. 

How to Calculate Capital Gains & Losses from Crypto

How you report crypto capital gains and losses on your tax return is quite different from how you report crypto as income. A capital gain happens when you dispose of your crypto at a higher price than its original cost. If the opposite happens, you dispose of your crypto at a lower price than the original cost, it’s a capital loss. 

To calculate the gain or loss, you subtract the initial purchase price and associated expenses from the selling price. Here’s how: 

1. Figure Out the Cost Base: This is what you initially paid for your crypto, plus any associated costs, like transaction/trading fees. Let's say you bought Bitcoin for $5,000 and paid a $50 fee. Your cost base is $5,050.

2. Calculate the Sale Price: This is how much you sold your crypto for, minus any costs related to the sale, like more fees or commissions.

3. Do the Math: Subtract the cost base from the sale price. If the result is positive, congrats, you have a capital gain. If it's negative, you're looking at a capital loss. Ouch!

Here’s an example:

Charlotte is a graphic designer from Melbourne who bought crypto for the first time last year. She purchased 2 BTC worth $15,000 each ($30,000 total) and paid a transaction fee of $100. Six months later, she sold 1 BTC for $40,000 and paid a $50 transaction fee. Here’s how she calculates a capital gain or loss:

The Capital Gains Tax Discount

If Charlotte had held her Bitcoin for more than 12 months, she would have qualified for a 50% CGT Discount. That means only half of the capital gain is taxable and the other half is not. So instead of reporting a capital gain of $24,900 on her tax return, she would only report $12,450. 

$24,900 ÷ 2 = $12,450.

What About a Capital Loss?

If you sell your crypto for less than its cost base, you can use the amount of the capital loss to offset other capital gains in the same financial year. If there are no capital gains to offset, or if your losses exceed your gains, you can carry forward the remaining capital loss to future years to offset against future capital gains.

How to Calculate Income From Crypto

Income earned from cryptocurrency activity is treated differently than capital gains. The value of the crypto in AUD at the time of receipt is added to your other income sources. Your total income is then taxed at your marginal rate. This type of income does not qualify for the CGT discount. However, expenses incurred to earn this income can be deducted. 

The key difference comes down to the nature of transactions, the treatment of losses, and how the tax rate is applied. While capital gains arise from asset disposal and may be discounted, regular income encompasses earnings from various activities and is taxed alongside other income without any CGT discount. Here’s how to calculate crypto income: 

1. Determine the Value: confirm and record the value of the cryptocurrency on the date you received it. Convert this value to Australian Dollars (AUD). This is the amount that will be considered for tax purposes.

2. Add Up All Income Sources: Add up the AUD values of all the cryptocurrency you received as income throughout the financial year. This total sum is what you will report as your crypto income.

3. Deduct Any Relevant Expenses: If you incurred any costs directly related to earning this crypto income, such as electricity costs for mining, you can deduct these from the income total.

Only expenses directly related to earning crypto (not general expenses) are deductible.

Here’s an example:

Remember Charlotte? She’s our graphic designer from Melbourne. Charlotte has a side hustle as an NFT artist. Last year sold three NFTs for 0.5 ETH each. In a spreadsheet, she kept a record of the date she received the ETH, how much it was worth in AUD when she received it, and how much she paid in AUD for Gas fees. 

On her tax return, she will report her NFT income and expenses in the ‘Other Income’ section. The net amount will be added to her total income for the year, which will be taxed at her marginal tax rate: 

Understanding Australian Tax Brackets

Your total taxable income is the sum of all income sources, including crypto capital gains and income from crypto activity, less any credits and deductions you qualify for. This determines what tax bracket you’re in, which determines the percentage of your income that you will pay as tax. Below are the current Australian Resident Tax Rates for 2023-2024: 

Source: Australian Tax Office

Tax-Free Crypto Transactions (Yes, They Exist!)

Crypto tax sucks. But it’s not all doom and gloom. There are some situations where you don’t have to pay any crypto tax. Such as:

• Purchasing crypto with Australian dollars (AUD) 
• When someone gives you crypto as a gift. However, you are subject to tax if you sell it.
• Transferring crypto between wallets. In some cases, the fees may be considered disposal of assets and subject to crypto tax.
• Receiving crypto from a chain split, also known as a hard fork.
• Donating crypto to a registered charity. You need to receive a Deductible Gift Receipt. 
• If you win a lottery or contest where the winnings are crypto.
• If your crypto is considered a personal use asset used to buy personal items.

What Is a Personal Use Asset?

You don’t have to pay tax on crypto transactions with a personal use asset. The ATO considers cryptocurrency a personal use asset if it's primarily kept or used for personal activities, like buying personal items or for personal consumption. But this only applies to crypto you acquired for less than $10,000 AUD, and timing is everything. 

If you purchase crypto and quickly use it for personal consumption, like buying a latte at a cafe that accepts Bitcoin, it's more likely to be seen as a personal use asset. However, if you hold onto the crypto for a while before using it, or only use a small portion for personal use and hold the rest, it's less likely to qualify.

Also, if there’s a change of plans you can still be taxed. For example, you might buy crypto for personal use initially but later keep it as an investment or for business purposes. The main use at the time of disposal determines whether or not it’s a personal use asset. Your original intentions don’t matter. You need to demonstrate how you actually used the crypto from the time you bought it until you disposed of it.

Crypto is NOT considered a personal use asset if you: 

• Convert it to AUD or another crypto to buy personal use items.
• Use it to buy a gift card or similar product for personal use.
• Top up a prepaid debit card, which is then used for personal purchases.
• Use a payment gateway or intermediary to acquire items instead of direct crypto transactions
• Hold it as an investment
• Use it in profit-making activity or as part of running a business

How Much Tax Will I Pay?

This depends entirely on your total income from all sources, minus any credits and deductions you qualify for. However, there are tools to help you estimate how much tax you will owe or get back. We suggest using this Simple Tax Calculator in Australia, available on the Australian Tax Office website. 

We also suggest using crypto tax software to simplify the record-keeping process. These programs integrate with most cryptocurrency exchanges and some wallets, automatically importing and consolidating all your crypto transaction data.

The downside of crypto tax software is that it works best for people who use online exchange platforms. What if you value your privacy, prefer cash transactions, or your wallet isn’t compatible with the software?

How Localcoin ATMs Make Record-Keeping a Breeze

Not only do Localcoin ATMs offer a quick and easy way to buy crypto with cash, but they also make it easier to keep detailed records of your transactions - especially if you prefer dealing in cash.

You’ll get a receipt showing a clear record of the date, time, amount, and value of the transaction in Australian dollars (AUD). This is crucial for tax purposes because you need to know the value of your crypto in AUD at the time of each transaction to accurately calculate capital gains/losses or to report income.

Plus, you don’t have to share a ton of personal information about yourself and your financial situation. All you need is valid photo-ID. The entire process takes just two minutes and fees like using a regular ATM. Find your nearest Localcoin ATM today and experience the seamless way to dive into crypto.

Oh, and keep your receipts!

NOTE: The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes that affect you and/or your business.