The cryptocurrency market is becoming increasingly popular with the Australian Taxation Office (ATO) recently reporting around 600,000 Australians investing or trading in cryptocurrencies.

This has certainly caught the attention of the ATO who are now closely monitoring crypto trades and data matching to the information included in income tax returns.

It is a common misconception that cryptocurrency trades are only taxable when the holdings are cashed back into Australian dollars.

This is simply not the case. 

The ATO does not view cryptocurrencies as money, instead the ATO classes crypto as property, and in most cases property is taxed when disposed of.

A disposal of crypto can occur when you:

• sell or gift cryptocurrency

• trade or exchange cryptocurrency

• convert cryptocurrency to fiat currency

• use cryptocurrency to obtain goods or services.

How crypto is taxed will depend on various factors such as your intention and the repetition and regularity of trades, which will ultimately determine if you 'invest' in crypto or 'trade' in crypto. 

Investors typically buy cryptocurrencies with a long term focus on building wealth over an extended period of time with profit made from long term capital gains. On disposal, gains and losses will be determined under the capital gains regime and investors may receive the 50% general discount.  

Traders typically trade in a 'business like' manner with a real focus of profits in the short term. Trades are more frequent and may occur over a shorter period of time. On disposal, gains and losses will be taxed at the individual's marginal tax rates and are not eligible for the 50% general CGT discount. 

Navigating the tax implications of crypto trades can be tricky and therefore it is important you keep detailed records of all cryptocurrency transactions. 

If you would like more information on cryptocurrency and your tax implications, please do not hesitate to make an appointment with us today.