Since cryptocurrencies (often shortened to “crypto”) such as Bitcoin, Ethereum, and Cardano have emerged, they have become the top retail investment trend over the last few years. As the boom in these cryptocurrencies has grown, investors have reaped substantial gains (and suffered significant losses) over short timeframes.
Nowadays, investors actively need to deal with several challenges regarding tax obligations and cryptocurrency. Most frequently asked questions surrounding this include what currencies should be up for trade, what exchanges should be used, how it should be used in terms of payment currency and what kind of records should be kept.
However, some of the most important questions revolve around crypto’s tax implications.
What Tax Implications Do Cryptocurrency Gains & Losses Have?
Most people have little to no understanding of crypto’s tax implications, partially because of how effects don’t manifest until the trade date.
The anonymity of cryptocurrencies in the digital world doesn’t mean people can ignore tax obligations. According to the Australian Tax Office (ATO), data from financial institutions, banks, or online exchanges can (and will) be traced back.
Given all the considerations involved, the best step is to hire a cryptocurrency tax agent. Read on to learn more about why this is beneficial:
- Avoid Audits or Penalties – According to the ATO, tax evaders will certainly be tracked and-in turn-penalised. It’s essential to fulfil tax obligations in a timely manner to prevent audits.
- Maximise The Tax Return – A vital part of the role of any tax agent is to make sure that each deduction a person is entitled to gets claimed. That way, tailored crypto tax advice can be provided.
- Reduce Stress and Time – Cryptocurrency taxation is constantly evolving, which means it can be tough to keep up with for a standard crypto buyer. Tax return submissions that are done with a tax agent can lessen stress considerably and save time otherwise spent on taxes as well.
- Tax-Deductible – When doing a tax return utilising a tax agent, the cost is an expense that’s tax-deductible for the following year.
There’s Tax-Free Crypto
Not all crypto activities in Australia involve tax. On the other hand, there are straightforward provisions, such as holding or buying crypto that does not require tax payments. The lines could very well get blurred by transactions that seem tax-free, so it’s important to err on the side of caution. Examples of this include going from “investor” to a trader and decentralised finance (DeFi) transactions.
Some of the situations wherein tax does not have to be paid on crypto in Australia include, but are not limited to:
- Buying crypto
- Buying goods and services under $10,000 (as long as the asset is for personal use)
- Donating crypto to registered charities
- Getting crypto as a gift
- Getting crypto from mining at the hobby level
- Holding crypto
- Transferring crypto between a person’s wallets
Cryptocurrency such as Bitcoin and other variations have become popular over recent years. Today, the ATO takes this into account when it comes to taxes. Hiring a cryptocurrency tax agent will make mitigating crypto tax implications easy.
Looking into crypto investing in Australia? Check out Brawler’s Guide today! We’re a resource hub for big thinkers, big doers, ambitious upstarts and entrepreneurs with a dream.