Cryptocurrency can be commonly traded on an exchange of fiat currency or used to purchase goods online. Whether acquiring or disposing of such digital assets, there are tax implications.
When acquiring or disposing of cryptocurrency, it is imperative to be aware of the tax implications. These vary and are dependent on the nature of the purchase and the intended use. However the use, it’s essential to keep records of the acquisition or the disposal of cryptocurrency.
What records do you need to keep?
- Date of transaction
- Value of the purchase in AUD
- What the transaction was for and who the other party was (even if it’s just their cryptocurrency address).
If you acquire cryptocurrency as an investment, you will not be entitled to the personal use asset exemption. However, if you held the cryptocurrency for 12 months or more, you may be entitled to the CGT discount.
One of the hardest issues the ATO is currently facing are intra cryptocurrency transactions. This means you use one crypto currency to purchase another. Essentially, one may exchange a CGT asset for another CGT asset.
The ATO states the following message on their website;
“We are currently consulting with industry and other interested stakeholders to seek feedback on practical compliance issues arising from cryptocurrency to cryptocurrency transactions.”
In saying this, cryptocurrency is a new asset form that has undergone rapid expansion and due to such expansion the ATO is lagging in its approach to apply legislative conforms of compliance.
This dramatic power distance between that of legislative authority and capital gains of cryptocurrency may perhaps be the beginning of a greater issue than the ATO have anticipated…
