News location:

Canberra Today 14°/16° | Friday, March 29, 2024 | Digital Edition | Crossword & Sudoku

Sponsored Content

Crypto investment comes with tax consequences

“The ATO takes the view that crypto is not money, it is an asset; so most of the time it comes within the capital gains tax rules,” says accountant GAIL FREEMAN in this sponsored post.

DURING a Zoom discussion, Blake told me he had invested in Dogecoin “based on Elon Musk’s advice”, but he hadn’t done as well as expected. He was looking for guidance on how he should account for it in his tax return.

Gail Freeman.

I told him the Australian Taxation Office (ATO) had published several documents on how profits and losses should be disclosed.

“The ATO takes the view that crypto is not money, it is an asset; so most of the time it comes within the capital gains tax rules,” I said.

“You make a capital gain or loss when you sell or gift it, trade or exchange it, convert it to currency such as Aussie dollars or use crypto to purchase goods or services.

“That capital gain is then taxed in accordance with the capital gains tax rules other than some exemptions, which are set out below. It is worth pointing out that the ATO has agreements with the Australian data exchanges so the ATO has information on your purchases and sales.

“There is an exemption from capital gains tax for personal-use assets. So if the Dogecoin cost less than $10,000 and is used mainly for purchasing goods and services and your intention was not to make a profit from it, then the ATO will accept that it does not fall within the capital gains tax provisions.”

Blake explained that he had bought more than $10,000 worth of crypto to make a profit and didn’t fit within that exemption.

“As you purchased the crypto as an investment, provided you held it for more than 12 months, any profits that you made will be subject to capital gains tax,” I told him.

“You will also be able to offset any capital losses against those gains. The 12-month rule is important so that you can claim the 50 per cent discount on the capital gain on your tax.

“If you didn’t hold them for more than 12 months or your intention was to buy and sell for short-term gains, then you are a trader and the gains would be taxed as assessable income and the 50 per cent capital gains tax discount would not apply.

“Also if you trade your Dogecoin for another cryptocurrency you would have two capital gains tax transactions. The first is the sale of Dogecoin and the second the purchase of the new crypto. Even though no money changes hands, you would still have to pay capital gains tax on the first transaction.

“Also, make sure you have the correct records of your transactions. You need the date of the purchases and sales of any crypto, its value in Australian dollars at the time of the transactions, the crypto address of the other party to the transactions and the nature and purpose of each transaction.

“In my experience, most crypto dealers provide you with an annual summary of your transactions that enables us to prepare the tax calculations.

“However, you need to bear in mind that the statement could well be in US dollars, which will need to be converted to Australian dollars.”

Blake said: “Thank you so much Gail, I will be able to do the calculations with your help and it doesn’t seem to be quite as scary.”

If you need help with your cryptocurrency transactions or any other tax related matter, contact the friendly team at Gail Freeman & Co
on 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au

Disclaimer

This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser.

Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.

Who can be trusted?

In a world of spin and confusion, there’s never been a more important time to support independent journalism in Canberra.

If you trust our work online and want to enforce the power of independent voices, I invite you to make a small contribution.

Every dollar of support is invested back into our journalism to help keep citynews.com.au strong and free.

Become a supporter

Thank you,

Ian Meikle, editor

Share this

Leave a Reply

Related Posts

Wine

The local fiano that punches above its weight 

"The Collector fiano was perfect to drink on a hot day: crisp, textural and with an element of preserved lemon. It is not a low-alcohol wine with a nudge above 13 per cent alcohol by volume," writes wine columnist RICHARD CALVER.

Lifestyle

Two words and you may be off to Jamala Lodge

Here's a special advertising feature with a twist of April Fool's Day fun and the chance to win a free night's accommodation for two, valued at $1850 at the award-winning Jamala Wildlife Lodge at the National Zoo and Aquarium.

Follow us on Instagram @canberracitynews