Cryptocurrency is a virtual currency that utilises cryptography not only to secure its transactions but also to control the creation of new units. Cryptocurrency is decentralised, meaning it does not belong to any government or financial institution.
In Australia, cryptocurrency is treated like any other form of property for tax purposes (more on this later). This means that cryptocurrency is subject to capital gains tax when it’s sold. In this article, we will discuss how cryptocurrency is taxed in Australia and when it is not taxed. Of all these still sounds confusing, it would help if you have a cryptocurrency app in Australia that would make things easier.
But first, you may be asking, what is cryptography?
Cryptography is a technique used to convert readable data into an unreadable format, making it secure. It is used in cryptocurrency to verify transactions and to control the creation of new units.
How is cryptocurrency taxed?
Cryptocurrency is taxed in Australia when it is sold. The amount of tax you pay depends on how long you held the cryptocurrency before selling it. If you held the cryptocurrency for less than 12 months, you will have to pay your full marginal income tax rate on the profit. If you held the cryptocurrency for more than 12 months, you will only have to pay half your marginal income tax rate on the profit.
Classifying cryptocurrency
The Australian Taxation Office (ATO) has classified cryptocurrency as property for tax purposes. This means that cryptocurrency is subject to capital gains tax when it is sold. The ATO has also said that cryptocurrency is not treated as currency for tax purposes. This means that you cannot use cryptocurrency to pay for goods and services.
When is cryptocurrency not taxed?
There are a few instances where cryptocurrency is not taxed. These include:
- When you purchase cryptocurrency with the intention of selling it at a profit.
- When you use it to pay for goods and services.
- When you hold it for investment purposes.
Do you need to declare your profits from cryptocurrency?
Yes, you need to declare your profits from cryptocurrency on your tax return. You can use the capital gains worksheet in your tax return to calculate how much tax you need to pay.
Summary:
- In Australia, cryptocurrency is treated like any other form of property for tax purposes. If you purchase cryptocurrency and then sell it for a profit, you will need to pay capital gains tax on the profit.
- The amount of tax you pay depends on how long you held the cryptocurrency before selling it.
- There are a few instances where cryptocurrency is not taxed in Australia, including when you purchase it with the intention of selling at a profit or use it to pay for goods and services.
- You need to declare your profits from cryptocurrency on your tax return.
This article has been a quick guide on cryptocurrency and taxes in Australia. We hope you found it helpful! If you have any questions about cryptocurrency, feel free to contact the friendly people over at Bamboo.