The idea of investing in cryptocurrency has gained immense attention and popularity across the globe. Today, crypto investments stand as a proud and safe form of investing your hard-earned money. The first cryptocurrency to enter the global market is Bitcoin. Following the website https://bitcoins-digital.com/ also paved their way into the industry. With more and more crypto investments and increasing investment opportunities, central banks and other regulatory agencies across the globe are looking at their options of monitoring these transactions.
Taxation on crypto
Many countries including India, the US, and the UK have come forward in the acceptance of cryptocurrencies. The central banks and taxation authorities have recommended imposing tax regulations on any capital gains from crypto investments. While the tax regime varies for each city it is evident that imposing tax calculations on crypto gains works as an alternate source of income. The most recent to join this list is India.
Taxation on crypto investments in Australia
In 2014, Australia announced its tax policy on crypt investments. The tax regime and the guiding principles are drafted by the Australian taxation authority. It is estimated that approximately 100k Australians own crypto investments and this figure is going to rise in the coming years. The government collects records of crypto investors from their listed service providers regularly. This listing is in turn utilized to verify if these investors are complying with the tax regulation or not. These service providers who share data with taxation authorities may include brokerage firms, crypto exchanges, and even ATMs.
How does cryptocurrency tax imposed in Australia?
Cryptocurrencies are subjected to capital gain tax policy as per guidelines defined ATO. Capital gains are calculated on the Australian dollar value. The difference value that comes up during the buying and selling of a crypto asset is the capital gain on the asset. Additionally, this capital gain tax is imposed only if the said crypto was held by an investor for less than 12 months in a row. In case the investor has held the asset back for more than 12 months then it is eligible for a certain discount.
Now that we have understood the tax implication let us also look at multiple scenarios on which taxes may apply.
If you are buying a cryptocurrency
In case you are buying a cryptocurrency using fiat currency then be rest assured that there is no tax involved here. However, you need to keep track of the total amount paid during this transaction.
If you are selling a cryptocurrency
Every cryptocurrency attracts capital gains when you are trying to sell them. In case the sale value is higher than the purchase value then the difference amount as applicable attracts capital gains tax.
If you are trading a cryptocurrency
If you are buying one cryptocurrency using another then such transactions do attract capital gains tax.
If you are transferring cryptocurrency
There is no tax implication if you wish to move your cryptocurrencies from one exchange to a wallet or another exchange and vice versa. A tax calculator like Cointracker can easily detect such transactions and these coins are kept aside as non-taxable coins.
Buying/selling goods and services using cryptocurrencies
Australia has also made buying products and services available in exchange for cryptocurrencies. You can pick your favorite coffee, dessert, or even dress using your crypto balance. And such payments do not attract any tax as well. But in case your payment exceeds 10K Australian dollars then such purchases are eliminated from personal use and attract consumer goods tax as applicable on the total bill value.
Tax regimen if you undertake data mining on cryptocurrencies
Australian government classifies mining activity into two types – hobby/business.
So if you are undertaking mining activity as part of your hobby, then be calm as there are no tax implications here.
But if you are a registered business analysts or data mining company then your data mining activity does attract tax to it. You need to declare the overall market value and ensure that the received amount is taxed. In such cases, you are also eligible to claim the mining deduction and exemption as called out by the Australian tax authority.
