Australia Crypto Tax Guide 2024

Tax time kicks off on July 1. Wondering about your crypto tax obligations? We’ve teamed up with Koinly to deliver your essential Australia Crypto Tax Guide 2024.

How is Crypto Taxed in Australia?

The ATO guidance is clear that crypto is not a currency, but a property—and a capital asset for tax purposes. That means crypto may be subject to both Capital Gains Tax or Income Tax depending on your specific transaction.

To further convolute things though, it also matters whether your investments are viewed as personal investments or trading income.

Are You an Investor or a Trader?

If your cryptocurrency dealings primarily involve using it as a personal investment, with most of your earnings coming from long-term capital gains, you are likely considered an investor. In this case, cryptocurrency gains and losses are subject to Capital Gains Tax (CGT).

Traders, on the other hand, engage in business or profit-making activities involving cryptocurrency that generate ordinary income. To be classified as a trader, you must assess your specific facts and circumstances and consider the perspective of the Australian Taxation Office (ATO).

Investor

Despite the term and the possibility of frequent cryptocurrency trading, most Australians fall under the Investor category. If your primary use of cryptocurrency is for personal investment and the majority of your earnings come from long-term gains, you will likely be classified as an Investor. Consequently, gains on cryptocurrency are subject to Capital Gains Tax (CGT).

Trader

Traders are businesses, including sole traders, that engage in cryptocurrency-related business activities. To be classified as a trader, you must evaluate your facts and circumstances and consider how the ATO will view your activities. At a minimum, you should be:

• Conducting your activities for commercial reasons in a commercially viable manner
• Undertaking activities in a business-like manner, such as preparing business plans and acquiring capital assets or inventory in accordance with the business plan
• Maintaining accounting records and marketing your business name

These are a few factors in determining a business activity. Others include your professional education, time spent, activity scale and sophistication, and use of automation. If unsure, consult a crypto-specialised accountant or contact the ATO for advice.

For the remainder of this guide, we’ll focus on the tax implications for individuals. 

Capital Gains Tax on Crypto

You’ll pay Capital Gains Tax any time you dispose of a capital asset—including crypto. Disposals of crypto include:

• Sales of crypto for fiat currency like AUD
• Trades of crypto for other crypto, including stablecoins and NFTs
• Spending crypto on goods or services (unless as a personal use asset)
• Gifting crypto

Capital Gains Tax Rate

If you’ve held your crypto for less than a year, your Capital Gains Tax rate is the same as your Income Tax rate. If you hold for more than a year though, you’ll pay a lot less tax.

Long-term Capital Gains Discount

Long term gains, for assets held over 12 months, receive a 50% discount, so you’ll pay half the amount of tax you would on short-term gains from assets held less than a year. This discount is only available for individual taxpayers and 1/3% (i.e. 33.33333%) for compliant super funds.

Capital Losses

Selling your cryptocurrency for less than its purchase price results in a capital loss. These losses can offset gains and reduce your tax liability. However, be aware of the wash sale rule, which disallows losses if you repurchase the same asset shortly after selling it.

How to Calculate Capital Gains and Losses

To calculate your capital gain, start with your cost basis (purchase price plus fees). Subtract this from your sale price to find your gain or loss. If you disposed of your crypto differently, use its fair market value in AUD on that day.

Accounting Methods

The above example is simple and doesn't cover multiple assets of the same kind, which is common for crypto investors. For instance, if you have several BTC bought at different times with different costs, which cost basis do you use when selling 1 BTC? The ATO allows these accounting methods for individual investors:

• FIFO (First In, First Out): This method dictates that the first asset you acquired is the first asset you sell.
• HIFO (Highest In, First Out): This method dictates that the asset with the highest cost basis is the asset you sell.
• LIFO (Lowest In, First Out): This method dictates that asset with the lowest cost basis is the asset you sell.

For traders, only FIFO is permissible. Using a crypto tax tool like Koinly can help you identify the best cost basis method for your situation.

Income Tax on Crypto

In some cases, even individual investors must pay Income Tax on crypto, typically when earning it as ordinary income. Transactions subject to Income Tax include:

• Getting paid in crypto
• Selling NFTs you create
• Earning staking or mining rewards—unless you’re a hobby miner
• Earning interest on crypto
• Airdrops of crypto—excluding initial allocation airdrops
• A variety of other DeFi activities where you earn new tokens from protocols

If your crypto is subject to Income Tax, calculate the amount owed by identifying its fair market value in AUD on the day you received it. This amount is taxed according to your Income Tax bracket based on your total annual income.

When is Crypto Tax Free?

• Buying crypto with AUD
• Holding crypto as a long-term investment
• Receiving crypto as a gift
• Rewards from hobby mining
• Transferring crypto between your own wallets
• Donating crypto
• Spending crypto as a personal use asset
• Initial allocation airdrops of crypto

Airdrops

The ATO has updated its guidance on airdrops, stating that most are considered ordinary income at the tokens' fair market value on the date received. However, initial allocation airdrops are tax-free upon receipt. Your cost basis for these is what you paid for the tokens, or zero if you paid nothing. Examples from the previous year include ApeCoin (APE), Looks Rare (LOOKS), Ethereum Name Service (ENS), Optimism (OP), and Paraswap (PSP).

Crypto as a Personal Use Asset

Spending crypto on goods or services is usually considered a disposal of a capital asset and is subject to Capital Gains Tax. However, if your crypto is a personal use asset, it's an exception. This is rare and depends on your intention and the holding period. According to the ATO, crypto used shortly after acquisition for personal purchases is more likely a personal use asset. Crypto held as an investment and later spent is generally not considered a personal use asset. If you bought crypto intending to buy goods and did so quickly, it might qualify as a personal use asset and be tax-free.

ETFs

Bitcoin and crypto ETFs are increasingly popular investments. However, their tax treatment is similar to holding Bitcoin or other crypto directly. ETFs that invest in crypto are taxed based on capital gains or losses when you sell your holdings. If you realise a capital gain, you’ll owe Capital Gains Tax.

ETFs are often considered ‘tax efficient’ because they can influence when capital gains are distributed. However, unlike ETFs tracking indices like NASDAQ that pay dividends, spot Bitcoin ETFs do not distribute dividends.

Crypto SMSFs

According to the ATO, the amount of crypto held in SMSFs has increased by over 400% in the last four years, largely due to the tax benefits. During the accumulation phase, tax on investment income is capped at 15%. In the retirement phase, no tax is payable if you’re a 'complying fund' and under the $1.6 million cap. Long-term capital gains are reduced to 10% if the asset is held for 12 months or more. You can also claim tax deductions for contributions to your SMSF, although annual contribution limits apply.

How to Report Your Crypto to the ATO

You report your crypto to the ATO as part of your annual tax return by October 31 each year (or by May 15 the following year if your accountant is filing on your behalf).

You have several options for reporting your crypto to the ATO:

• MyTax: The ATO’s MyTax service lets you file your lodgement easily online. You’ll report gains and losses from disposals of crypto as capital gains, alongside capital gains and losses from any other investments. Meanwhile, crypto income will be reported in the section ‘other income not listed above’.
• Paper forms: For paper forms. Crypto gains are reported in the Tax return for individuals (supplementary section) (NAT 2679). Crypto income is declared on question 2 of the tax return for individuals (NAT 2541). If you've earned more than $10,000, you must also complete the Capital Gains Tax Schedule.
• Tax filing software: You can also use tax filing software like Etax, H&R Block, and others to file your tax return and report your crypto. Koinly offers step-by-step guides on how to do this on each platform.

Who Can Help You with Your Australian Crypto Tax?

You can use a crypto tax calculator like Koinly to simplify your crypto taxes. Cointree users receive an exclusive 30% discount on Koinly plans using code COINTREE24.

Disclaimer

The information is for general information only. It should not be taken as constituting professional advice from Koinly. Koinly is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances. Koinly is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website.

For more information on how the ATO taxes cryptocurrency, check out their website.