The Tax Treatment of Cryptocurrencies in Australia

Rede Accountants Gold Coast, Brisbane & Toowoomba

With cryptocurrency becoming the phrase on everyone’s mind recently, the ATO is working out how to make sure investors and traders aren’t dodging their taxation responsibilities.
Cryptocurrency, the most common being Bitcoin, is a digital currency that uses cryptography as security. Cryptocurrencies are designed with the intention of becoming an alternative currency. However, the digital currency is not currently being regulated by national governments.
The tax treatment for trading in Bitcoin differs significantly depending on the intention behind the transaction. As a personal investment, trading crypto-currency could attract capital gains tax upon sale.
On the other hand, mining bitcoin results in creating assessable income for the taxpayer.

The ATO’s view

Cryptocurrency is neither money nor foreign currency, and from the 1st July 2017, the ATO states that it is not a financial supply for GST purposes.

Capital Gains Tax for Investors

If a taxpayer is trading cryptocurrencies they will need to keep the relevant dates of the transactions, the value in Australian dollars, what the transaction was for and who the other party was.
Bitcoin Mining Bitcoin Mining has also been addressed by the ATO. Bitcoin Mining is when the taxpayer is in the business of trading bitcoin between third parties.
Tax treatment resulting from Bitcoin Mining: Any income derived from transferring mined bitcoin to a third party will be included in the taxpayer’s assessable income. The ATO will assess any profits that resulted from the sale of bitcoins, less any allowable deductions for losses made. Under this structure, cryptocurrency held by the taxpayer will be seen as trading stock rather than a CGT asset.

Self Managed Super Funds (SMSF)

SMSF’s may invest in cryptocurrency if the investment is allowed under the trust deed. The investment also needs to be in accordance with the fund’s specific investment strategy. The ATO states that SMSF cryptocurrency investments must be separate from personal or business investments for both the trustees and members.
The ATO released an article that further discusses the tax treatment of cryptocurrency which can be found via the link below: 
https://www.ato.gov.au/General/Gen/Tax-treatment-of-crypto-currencies-in-Australia—specifically-bitcoin/
For more information on how to manage the tax related to your cryptocurrencies why not talk to one of our Team ? Contact us here.