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Crypto and Capital Gains Tax

A question that often comes up is when do I pay tax on cryptocurrency? If you acquire the cryptocurrency to make a private purchase and you don’t hold onto it, the crypto might qualify as a personal use asset. In the ATO view, generally a CGT event occurs when disposing of cryptocurrency as it is an investment.

The CGT event can include selling cryptocurrency for a currency (e.g., $AUD), exchanging one cryptocurrency for another, gifting it, trading it, or using it to pay for goods or services.

Each cryptocurrency is a separate asset for CGT purposes. When you dispose of one cryptocurrency to acquire another, you are disposing of one CGT asset and acquiring another CGT asset. This triggers a taxing event.

Transferring cryptocurrency from one wallet to another is not a CGT disposal if you maintain ownership of the coin.

Record keeping is extremely important – you need receipts and details of the type of coin, purchase price, date and time of transactions in Australian dollars, records for any exchanges, digital wallet and keys, and what has been paid in commissions or brokerage fees. The ATO regularly runs data matching projects, and has access to the data from many crypto platforms and banks.

Deductions for losses can be claimed if you are a trader, otherwise the loss is a capital loss.

If you have any further questions please do not hesitate to contact your Sullivan Dewing Client Manager.

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