Crypto tax basics

The ATO has published detailed guidance on crypto-assets. For most Australians who hold crypto as an investment, crypto is treated as property, specifically a capital gains tax (CGT) asset, rather than as money. That has some consequences many people do not expect, such as swaps between crypto-assets potentially triggering tax.

When does a CGT event happen?

According to the ATO, you dispose of crypto, potentially triggering a CGT event, when you:

• sell crypto for Australian dollars or another currency;
• swap one crypto-asset for another, including stablecoins;
• gift crypto;
• use crypto to pay for goods or services;
• convert crypto to fiat currency.

The ATO says the following are not disposals:

• buying crypto with Australian dollars;
• transferring crypto between wallets you own (keep records of the transfer).

Working out a capital gain or loss

In general terms, your capital gain or loss is the difference between what you received on disposal (its market value in AUD if you swapped it) and your cost base, which is what you paid plus certain costs such as fees.

The CGT discount

If you are an individual and held the crypto for at least 12 months before the CGT event, you may be eligible to reduce a capital gain by 50 per cent under the general CGT discount rules.

Capital losses

Capital losses can generally offset capital gains in the same income year, with unused losses carried forward. They cannot reduce other income such as salary.

Staking, airdrops and income

The ATO generally treats staking rewards as ordinary income, assessed at their market value when received; that value then forms the cost base for future CGT purposes. Airdrops may also have income consequences depending on circumstances. If you carry on a business of trading crypto, different rules apply and gains may be ordinary income.

Personal use assets

There is a limited exemption for crypto acquired and used mainly to buy items for personal use or consumption. The ATO says it does not apply where the cost of the crypto was more than $10,000, and crypto held as an investment, even briefly, is generally not a personal use asset.

Keeping records

The ATO expects you to keep records of each transaction, including:

• dates of transactions;
• the value in Australian dollars at the time;
• what the transaction was for and who the other party was (even if just a wallet address);
• exchange records, receipts, wallet addresses and fees.

Records are generally required for five years after the relevant CGT event or after you lodge. Exporting transaction histories regularly from platforms protects you if a platform closes.

The ATO's data matching

The ATO collects information from Australian crypto platforms about account holders and transactions, and uses it to identify people who may need to report capital gains or losses. It is wise to assume your platform activity is visible to the ATO.

Lost, stolen or scammed crypto

Lost private keys and theft may have specific tax treatment, depending on evidence. The ATO has guidance on this. Being scammed does not automatically create a deductible loss; seek advice.

Worked example in words

Suppose an individual buys some crypto, pays a platform fee, and two years later swaps it for a different crypto-asset. The swap is a disposal. The capital proceeds are the AUD market value of the new crypto received at the time of the swap. The cost base is the original purchase price plus eligible fees. If proceeds exceed the cost base, there is a capital gain, which may be eligible for the 50 per cent discount because the asset was held for more than 12 months. The new crypto then has its own cost base, equal to its market value at the swap. This is a simplified illustration only; real situations can involve many parcels and more complex rules.

Common record-keeping mistakes

• Relying on a platform to keep records that may disappear if it closes.
• Forgetting small swaps and fees.
• Not recording transfers between your own wallets.
• Missing staking rewards and airdrops.

The bottom line

For most investors, crypto is a CGT asset and every disposal, including swaps, can matter. Keep detailed records from day one and check the ATO's guidance or a registered tax agent for your situation.