What is Cryptocurrency Tax Accounting?
In Australia, the Australian Taxation Office (ATO) governs the tax treatment of cryptocurrency transactions. According to the ATO, cryptocurrency is categorized as a form of property for tax purposes. Consequently, transactions involving cryptocurrency can give rise to tax implications, including Capital Gains Tax (CGT) and Goods and Services Tax (GST).
Capital Gains Tax (CGT) is applicable when a capital asset, such as cryptocurrency, is disposed of, resulting in a capital gain or loss. This gain or loss is computed as the variance between the acquisition cost of the asset and the proceeds from its disposal. For instance, if one were to purchase 1 bitcoin for $10,000 and subsequently sell it for $20,000, a capital gain of $10,000 would be incurred, subject to CGT.
Goods and Services Tax (GST) is levied on the supply of goods and services in Australia, encompassing digital currency. While GST typically does not apply to regular crypto trading transactions, engaging in crypto mining activities may render one liable for GST on crypto transactions related to mining.
Maintaining meticulous records of all cryptocurrency transactions, along with their values in Australian dollars at the transaction time, is crucial. This ensures accurate reporting of any capital gains or losses during the acquisition, disposal, or holding of cryptocurrency. These records should be retained for a minimum of 5 years.
It is advisable to collaborate with a tax professional well-versed in the Australian tax laws pertaining to cryptocurrency to ensure compliance and minimize tax liabilities.
Our in-house Cryptocurrency Tax Accounting solution at The Tax Planner is designed to alleviate the complexities of crypto accounting, ensuring precise fulfillment of tax obligations. Book a complimentary appointment today to initiate the process with accuracy and efficiency.
