Australian Government Posts Reasonable Cryptocurrency Tax Obligations

In mid-March, The Government of Australia published tax guidelines for citizens and businesses using cryptocurrencies to invest, make or receive payments. The document, “Tax treatment of cryptocurrencies,” is fairly readable and the compliance procedures outlined quite reasonable.

In short:

“Our view is that Bitcoin…is an asset for capital gains tax (CGT) purposes. Other cryptocurrencies…will also be assets for CGT purposes and will be treated similarly for tax purposes.”

According to the “Tax treatment”document, all businesses and individuals transacting in or trading crypto in Australia are required to record:

  • the date of the transactions
  • the value of the cryptocurrency in Australian dollars at the time of the transaction (which can be taken from a reputable online exchange)
  • what the transaction was for and who the other party was (even if it’s just their cryptocurrency address).

Capital gains made by individual investors are taxable, but for businesses using or trading crypto, crypto may be treated as “ordinary assessable income.” Businesses must record the crypto as income according to the asset’s market price at the time payment is received.

Crypto-based businesses, such as exchanges (including ATMs), traders, and crypto-miners, as well as other businesses  taking payments in crypto, “may be able to claim deductions, and any capital gains you make are reduced to the extent that they are also ordinary income.”

Investors, “make a capital gain if the capital proceeds from the disposal of the cryptocurrency are more than its cost base. Investors who hold crypto for longer thn 12 months, however, “…may be entitled to the CGT discount.”

Capital losses can be declared and, “…used to reduce capital gains made in the same year or a later year. Net capital losses cannot be offset against other income.”

Citizens making payments in crypto acquired exclusively for those purposes may be exempt from having to track capital gains, “if (the crypto) is acquired and kept or used mainly to purchase items for personal use or consumption.”

The Taxation department cited an example of a consumer who bought crypto and then immediately spent it on concert tickets.

But there’s a limit on how much crypto consumers can lay out, and there is no capital loss protection for crypto assets acquired for spending:

“Only capital gains you make from personal use assets acquired for less than $10,000 are disregarded for CGT purposes….all capital losses you make on personal use assets are disregarded.”

 Crypto-to-crypto trading guidelines are still being worked out. “We are currently consulting with industry and other interested stakeholders to seek feedback on practical compliance issues arising from cryptocurrency to cryptocurrency transactions.” Parties interested in participating in the discussion can click a link in the document.

Finally, getting a paycheque in crypto is considered a “fringe benefit…and the employer is subject to the provisions of the Fringe Benefits Tax Assessment Act 1986.” Employers must get an agreement signed by the employee in hand and must pay an amount of crypto equivalent to a standard employee wage according to the crypto’s value in Australian dollars at the time the work is performed.

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