Crypto taxation is a cumbersome proposition. Especially when we know that the industry is relatively young and the taxation and regulations have come to the picture recently. This guide dives deep into the crypto tax Australia-how cryptocurrency including tokens, NFTs, DeFi are taxed in Australia.
Also, read
9 best crypto tax software in Australia
8 best crypto tax software in the USA
11 best crypto tax software in the world
Please note that in this guide, by the terms ‘cryptocurrency’ and ‘crypto’ we mean all cryptocurrencies, tokens, NFTs and stablecoins that you buy, sell and trade. If used otherwise, I will mention it at the place.
Table of Contents
Crypto Tax Australia-How it works?
Australia does not treat crypto (cryptocurrencies, tokens, NFTs and stablecoins) as currency. It treats crypto as a property or asset and Capital Gains Tax (CGT) is levied on it. Most Australian crypto investors deposit CGT for their cryptocurrencies.
In some cases, however, which we will discuss later, crypto in Australia is also taxed as additional Income and comes under the Income tax.
To understand whether you need to deposit crypto tax under CGT or as an Income tax, we first need to understand the definition of Individual Investors and Traders from the perspective of the Australian Taxation Office (ATO).
Individual Investors vs Traders
Individual Investors
From the ATO (Australian Taxation Office) perspective, an Individual Investor is one who:
- Invests in crypto from a long-term perspective
- Does not involve in frequent buying, selling and trading of crypto
- Does hobby mining or staking activities
- Does casual trading
With some exceptions (in the way crypto is acquired), individual investors in crypto are subject to Capital Gains Tax (CGT).
Traders
Traders are the ones who
- Frequently involve in the buying and selling of crypto, i.e. the volume of transactions is high
- Run a crypto business like that of a crypto trading, exchange, mining or buying/selling of NFTs
- Perform activities in a planned, organized and business like manner like keeping business records, business plan and acquiring assets (products and services) required for your business.
- Repeat similar types of activities (like buying of same assets) for your business regularly
Traders income/profits from crypto are taxed as Income tax.
Crypto Tax Australia-Capital Gains Tax (CGT) and Income Tax
As discussed, Individual Investors (with some exceptions in the way crypto is acquired) are subject to Capital Gains Tax (CGT), whereas, Traders are subject to Income Tax. These are subject to the tax slabs declared by the ATO for 2022-23.
| Income | Tax on the income |
| 0-$18,200 | Nil |
| $18,201-$45000 | Nil + 19% of excess of $18,200 |
| $45,001-$120,000 | $5,092 + 32.5% of excess of $45,000 |
| $120,001-$180,000 | $29,467 + 37% of excess of $120,000 |
| $180,001 plus | $51,667 + 45% of excess of $180,000 |
Rates do not include Medicare levy of 2%. Source ATO
Capital Gains Tax
Capital Gains-How to calculate Capital Gains Tax?
In general, Capital Gains for an asset is calculated by subtracting the value of the asset at the time of acquisition, from the value at which the asset is sold.
Let’s say you buy a house at $200,000 in May of 2020 and sold it at $500,000 in June of 2022. Then the Capital Gains is calculated as
Net Capital Gains is calculated by subtracting any fees or charges incurred at the time of selling or buying the asset in addition to the cost of acquisition of the asset.
Capital Gains=(Value at which the asset is sold )- (Any fees or charges incurred at the time of selling the asset)–(Value at which the asset is acquired+ Any fees or charges incurred)
Hence Capital Gains for the example discussed above is
Capital Gains=$500,000-$200,000=$300,000
The ATO calculates Capital Gains on your crypto in a similar fashion. There are two concepts that we need to understand-CGT event or disposal and Cost Basis.
CGT Event
A CGT event happens when you dispose of your crypto (cryptocurrency, token, NFT, stablecoin). A disposal generally occurs when the ownership of the crypto changes. Specifically, a disposal occurs when:
- you sell crypto for Australian Dollars (AUD) or any other fiat currency
- you swap or exchange your crypto for another crypto (including stablecoins or NFTs)
- you spend crypto on buying products and services which are not seen personal and which are generally more than $10,000.
- you gift crypto
Cost Basis
Cost basis is simply the cost at which you acquired your crypto plus any related fees incurred in acquiring your crypto.
Cost Basis=Cost of acquiring your crypto + Related fees
Now that we have known the concepts of CGT event, disposal and cost basis, we are ready to define, how ATO calculates the Capital Gains on your crypto.
Capital Gains on your crypto=(Value of crypto at time of disposal plus any related fees or charges)-(Cost Basis)
Point to be noted:
- If the difference above, between value at disposal and cost basis is positive, then you have a Capital Gains and you need to pay taxes on it, as per your marginal income tax rate.
- If however the difference is negative, then you have realized a Capital loss and you do not pay taxes on it. An important point to note here is that you can adjust your Capital Loss to offset the Capital gains in the future years and hence reduce your tax liability.
- If you hold your crypto for more than a year, then you get a discount of 50% on your Capital Gains tax. For example if you have a Capital Gains of AUD 10,000 and you have disposed off the crypto after a year, then you have tax liability for only 50% of the Capital Gains, i.e. AUD 5,000.
Let us check some quick examples.
Case 1: No additional fees and charges applied and crypto disposed within a year
Alex bought crypto at AUD 1000
Alex sold the crypto at AUD 2000
Cost Basis=AUD 1000
Value at disposal=AUD 2000
Hence Capital Gains= AUD 2000-AUD 1000=AUD 1000
Hence Alex will have to pay taxes on Capital Gains of AUD 1000, as per his marginal income tax rate.
Case 2: Additional fees and charges applied and crypto disposed within a year
Alex bought crypto at AUD 1000 and had to pay AUD 100 as the fee for the platform from where he bought the crypto
Alex sold the crypto at AUD 2000. He was again charged a fee of AUD 200 by the platform where he sold his crypto.
Cost Basis=AUD 1000 + AUD 100=AUD 1100
Value at disposal=AUD 2000
Additional fee for selling crypto (disposal)=AUD 200
Hence, Net Capital Gains= (Value of the crypto at disposal)-Cost Basis-Additional Fee for selling crypto=2000-1100-100=AUD 800
Hence Alex has a Capital Gains of AUD 800.
Case 3: When Alex holds the crypto for more than a year
Let us suppose in the above example, Alex disposes/sells his crypto after a year. As we saw he was liable for a Capital Gains tax for AUD 800. Now, since he held his crypto for over a year, he gets to pay tax on 50% of his Capital Gains, i.e. AUD 400.
Capital Loss
- As opposed to Capital Gains, when the cost at which you disposed of your crypto is less than the cost at which you acquired it, then you have a Capital Loss.
- The beauty here is that you can deduct your Capital Loss from any Capital Gains and hence reduce your tax liability. For instance, let’s say you had a Capital Gain of AUD 5000. You also have a Capital Loss of AUD 3000 from another crypto. Here you can offset your gains of AUD 5000 from the loss of AUD 3000. Hence, you have net Capital Gains of (5000-3000), i.e. AUD 2000.
- You can carry your Capital loss for future years. There is no time limit. But you must ensure the loss is adjusted at the first available opportunity.
- You cannot deduct your Capital loss for income other than Capital Gains.
Income Tax
Traders are subject to Income Tax for their crypto investments. Besides this, individual investors, in some special circumstances are also subject to Income Tax. This is when individual investors acquire crypto by the following means.
- Getting salary paid in crypto.
- Selling NFTs that you create-like an artist.
- Earning crypto from staking or mining rewards.
- Airdrops and Forks
- Earning crypto from engage-to-earn platforms like-Referral rewards (Binance), Learn to earn like Coinbase and CoinMarketCap, watch to earn like Odysee, browse to earn like Permission.io and Brave, Play to earn games like Axie Infinity, Shop to earn like Lolli, share to earn like Moon Faucet.
- Earning crypto from DeFi protocols like lending, liquidity pools, yield farming, etc.
Crypto acquired from one of the modes discussed above are treated as additional income and are subject to Income Tax. However, when you dispose off the crypto (by selling, swapping, gifting), it creates a Capital Gain/Loss event and you are charged with Capital Gains Tax.
Let us discuss these events one by one.
Airdrops
When you receive
You are liable for Income Tax
When you receive crypto via an airdrop or a forking event, then the crypto is treated by the ATO as an additional income or bonus. In this case, you need to declare the value of the crypto on the date of receiving them, as your additional income to the ATO.
Example. Joe received 70000 Brise tokens as an airdrop. The value of the Brise token on the day Joe them was $0.0005. So, Joe will declare 70000 X $0.0005=$35 as his additional income, which will be subject to Income Tax.
When you dispose of
You are liable for Capital Gains Tax
Joe in the case we discussed above, might want to dispose of (sell, swap, spend or gift) the Brise tokens he received via the airdrop. In this case, if he sells the tokens at a profit, he makes a Capital Gain which will be subject to Capital Gains Tax. The cost basis is the value of the tokens on the day they were airdropped to Joe.
Example. Joe had 7000 Brise tokens which he was airdropped at a price of $0.0005. The cost basis of Joe tokens (the value at which Joe acquired the tokens) is 7000 X $0.0005= $35. Let’s say he sells the tokens after 6 months at $100. Then the Capital Gains = $100-$35=$65. Hence, Joe will be subject to a Capital Gains Tax of $65.
Hard Forks
When you receive
No Tax
The ATO does not charge Income Tax on crypto you receive as a result of a hard fork or chain split.
Example. Suppose you get 1 BCH as a result of the hard fork which happened to Bitcoin in 2017 (The bitcoin chain was split into two separate chains-Bitcoin (BTC) and Bitcoin Cash (BCH)). The ATO will not levy any Income Tax on the 1 BCH which you received as a result of the chain split.
When you dispose of
You are liable for Capital Gains Tax
Similar to an airdrop, when you dispose of crypto you received from a hard fork, you create a Capital Gains/Loss event and are subject to Capital Gains Tax for gains. But in the case of Hard Forks, the cost basis is zero. This is also because the ATO did not levy any Income tax on your crypto when you received it.
Example. You received 1 BCH as a result of the Hard Fork of Bitcoin in 2017. After a few months, when the price of the BCH is $2000, you sold it off. Since your cost basis is zero, you are subject to a Capital Gains Tax on $2000.
Token address change
General case-No Tax
There are no tax obligations when a cryptocurrency changes its underlying technology, such as when EOS switched from the ETH blockchain to the EOS mainnet or when DAI changed its contract address and renamed the previous coin SAI.
However, if the old coins retain value after the new ones have been issued; this could result in a Capital Gains Tax event.
Gifts and Donations
When you receive crypto as a gift
No Tax
When you receive crypto as a gift from someone, you are liable for no tax. However, you should note the value of the crypto at the time of receiving it, since it (the value) will be your cost basis at the time of you disposing of the crypto.
When you dispose of (sell, swap, trade) your gifted crypto
You are liable for Capital Gains Tax
While receiving crypto as a gift is tax-free, when you dispose of (sell, swap, re-gift, spend) your gifted crypto it raises a CGT event, subjecting your crypto to Capital Gains Tax. The cost basis is the value of the crypto at the time it was gifted to you.
When you gift crypto to someone
You are liable for Capital Gains Tax
The ATO considers crypto as an asset subject to Capital Gains tax. Just like any other asset, when it is gifted, crypto also when gifted is subject to Capital Gains Tax. Gifting crypto in Australia is a CGT event and is subject to Capital Gains Tax on the perceived profit.
Donating crypto
In Australia, like other donations, donating crypto to a deductible gift recipient (DGR) reduces your tax liability. You can deduct the value of the crypto donated from your tax liability or associated Capital Gains.
Mining
Crypto mining in Australia is not taxed if you are a hobby miner, and taxed if you are a business or a trader. There is a thin line between being a hobby miner and a trader which is dependent on several factors.
You are a trader or a business in mining if you have some of the things like a registration of your business (ABN number), a license, a business plan, a considerable investment made in resources for mining, a dedicate place for mining.
On the contrary if you are mining for fun or learning, have little to negligible investments made, no licenses, registrations, etc. then you are a hobby miner. More details on how the ATO categorizes a business miner and a hobby miner can be found here.
When you are a hobby miner
No Tax
When you are mining for fun or learning and have no business interest in it, you are a hobby miner. If you are a hobby miner, you are not liable for any taxes on the crypto you receive from mining.
When you are a trader or a business into mining
You are liable for Income tax
When you are a professional trader or a business into mining, the crypto received as a result of mining, is your additional income subject to Income tax. You would declare the value of the mined crypto as your additional income to ATO at the time of tax filing.
When you dispose of your crypto that you received in mining
You are liable for Capital Gains Tax
When you dispose of your crypto (sell, swap, gift, spend) you received via mining, you are subject to Capital Gains Tax. The Capital Gains is calculated by subtracting the value of the crypto you declared as your additional income from the value of the crypto you disposed of.
Crypto Tax Australia-NFTs
As mentioned earlier, NFTs are considered to be crypto assets, which are taxed in the same way as cryptocurrencies. Taxes on NFTs are dictated by your behavior and circumstances and whether you are considered an individual investor or a trader.
As mentioned earlier, the distinction between an individual investor and a trader can be quite hazy and complex at times. In these cases, it is advised to take the help of a professional tax consultant.
When you are a trader or a business owner
You are liable for Income Tax
When you are identified by the ATO as a trader or a business owner, then the profits made on NFTs are considered as additional income, subject to Income tax.
When you create NFTs, the value of the NFT created is subject to Income Tax. Also, when you sell an NFT you created or any other NFT, the profits you make are additional income subject to Income tax.
When you are an individual investor
Mostly you are liable for Capital Gains Tax (CGT)
Just like cryptocurrencies, disposing NFTs will create a CGT event. If you make profits you are subject to Capital Gains Tax and in case of loss, you can us this loss to offset your other Capital Gains to reduce your tax liability.
- Buying NFTs-No tax is levied on the NFTs you buy. However, if you buy NFTs using cryptocurrencies (which is generally the case), then any profits made on the cryptocurrency is subject to Capital Gains Tax. This is because you are disposing your crypto to buy NFTs.
Example: Let us say you bought $10,000 worth of Ether in June last year. This year in June, the value of the Ether becomes $12,000. You use these Ether worth $12,000 to buy NFTs on OpenSea. Now, the Capital Gains on Ether at the time it is disposed for NFTs is $12,000-$10,000=$2000. So, you are liable for CGT on $2000.
- Selling NFTs for cryptocurrency or fiat money-Again, when you sell your NFTs for cryptocurrency or fiat currency, the profits made is the Capital Gains, subject to Capital Gains Tax (CGT). The cost basis is the value of the NFTs at the time when it was purchased.
Example: Let us say you bought 10 NFTs in exchange of 3 Ether valued at AUD 10,000 (rates are just an assumption). It means the acquiring cost of the 10 NFTs is AUD 10,000. Then after a few months, you sold the 10 NFTs at AUD 15,000. Then the Capital Gains is AUD 15,000-AUD 10,000=AUD 5000. A Capital Gains tax will be levied on the gains.
- Swapping NFT for another NFT-Swapping NFT for another NFT is also disposal of your NFT, which creates a Capital Gains Tax.
Crypto Tax Australia-DeFi Taxes
As per the best of my knowledge (at the time of writing this article), ATO has not released any formal guidance on taxation in the crypto Decentralized Finance (DeFi) space. DeFi is a burgeoning space and we are yet to receive a formal tax rules from the ATO.
However, basis ATO’s tax guidance on crypto, we can infer the potential tax implications on DeFi activities. Speak to a professional crypto tax consultant to ensure your righteousness in DeFi taxes.
Broadly speaking, any DeFi activity which earns you cryptocurrencies or tokens are treated as additional income, subject to Income Tax. Whereas, those activities in which you are disposing (selling, swapping) crypto, are subject to Capital Gains Tax.
When you are earning crypto
You are liable to Income Tax
As mentioned, when you earn crypto in DeFi, you are subject to Income Tax. Some of these DeFi activities could include:
- Earning new crypto or tokens as staking rewards.
- Earning new crypto or tokens as rewards in Yield Farming.
- Earning liquidity tokens from DeFi protocols-Marinade, Lido and more.
- Selling or swapping NFTs and when you are viewed as a trader.
- Earning crypto or tokens through engage to earn DeFi protocols, like play to earn, learn to earn, etc.
When you dispose (sell, swap) crypto
You are liable to Capital Gains Tax
When you dispose your crypto and attain a profit, you are subject to Capital Gains Tax. Some of these DeFi activities include:
- Selling or swapping your NFTs. Please note that in case you are identified as a trader, profits made from selling or swapping NFTs will be treated as an additional income and hence will be subject to Income Tax.
- Buying NFTs from crypto (which is generally the case). In this case the cryptocurrency you used is subject to Capital Gains Tax.
- Accruing value on your crypto. As a result of DeFi protocols like staking, yield farming, liquidity platforms, you earn interest on your crypto. This results in accrual of value on your crypto. The accrued value or gains made is subject to Capital Gains Tax. The cost basis will be the value of the crypto initially when you staked or used in a yield farming protocol.
- DeFi margin trading and options protocol-The gains made via DeFi margin trading and options are Capital gains subject to Capital Gains Tax.
Crypto Tax Australia-ICO/IEO Taxes
You are liable for Capital Gains Tax
An Initial Coin Offering (ICO) or Initial Exchange Offering (IEO) is a phenomena in which investors can buy cryptocurrencies, before them being officially launched. This purchase usually happens via an existing cryptocurrency like Bitcoin or Ether.
ATO sees an ICO/IEO as a crypto-to-crypto trade and hence taxes it under the Capital Gains Tax (CGT). A CGT event is triggered both at the date of the ICO/IEO when you purchase the new crypto from the existing crypto (like Bitcoin or Ether) and also at a later day when you sell the crypto you purchased at the ICO at a higher price (suggestively).
Crypto Tax Australia-Tax Free Events
Some of the Tax free events are:
- Buying crypto with Australian dollar or any other fiat currency
- HODLing crypto. In fact HODLing for more than a year, it gives you a discount of 50% on your Capital Gains Tax.
- Receiving crypto as a gift.
- Crypto rewards from hobby-level crypto mining.
- Transferring crypto between your own wallets – but watch out for transfer fees.
- Purchasing goods and services with crypto under $10,000, if crypto is a personal use asset.
- Donating crypto to registered charities with Deductible Gift Recipient (DGR) status.
How to save Taxes in Australia
You cannot completely avoid crypto taxes in Australia. However there are different ways in which you can reduce your tax liability.
1. HODLing for over a year- If you HODL your crypto for more than a year, it gives you a discount of 50% on your Capital Gains Tax.
2. Tax Loss Harvesting-In cases when you realize Capital Losses, you can offset these losses in your Capital Gains.
3. Invest in Bitcoin ETF
4. Invest in BTC Super
5. Donate to a registered charity
6. Use a crypto tax software
Crypto Tax Australia-FAQs
Is Australian crypto tax-free?
No. Crypto investments are taxable in Australia. The Australian Taxation Office (ATO) treats crypto as an asset class which is subject to Capital Gains Tax.
Do you only pay tax on crypto when you cash out?
No. In Australia if you are identified as a trader, then crypto or tokens that you earn in DeFi like from staking protocols, yield farming protocols, engage to earn protocols, etc. are treated as an additional income, which are subject to Income Tax.
Free crypto tax calculator?
Check this free calculator from Koinly.
Check this free Calculator from ClearTax.
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Koinly vs crypto tax calculator?
What is the capital gains tax in Australia?
Capital Gains on your crypto=(Value of crypto at time of disposal plus any related fees or charges)-(Cost Basis)
Read more here.
How to keep track of crypto for taxes?
Use any crypto tax software. Read a complete review and comparison of 11 best crypto tax software including Koinly and Crypto Tax Software.
Is crypto legal in Australia?
Yes, cryptocurrencies are legal in Australia and are treated as property for tax purposes.
Can the ATO track your crypto holdings?
Yes. The Australian Taxation Office (ATO) is connected to the Australian crypto exchanges in which you have your account.
How to avoid tax on cryptocurrency in Australia?
You cannot completely avoid crypto taxes in Australia. However there are different ways in which you can reduce your tax liability.
1. HODLing for over a year- If you HODL your crypto for more than a year, it gives you a discount of 50% on your Capital Gains Tax.
2. Tax Loss Harvesting-In cases when you realize Capital Losses, you can offset these losses in your Capital Gains.
3. Invest in Bitcoin ETF
4. Invest in BTC Super
5. Donate to a registered charity
6. Use a crypto tax software
Please note that this guide is not a tax advice but rather general information that crypto investors should take into account, when assessing their tax responsibilities.
Disclaimer
