Bitcoin is neither considered money nor Australian currency or any other foreign currency. It’s considered as an asset and is subject to capital gains tax (CGT). A CGT is applicable when you sell your cryptocurrency. You pay tax only when you sell and not just buy and hold.
Few types of transactions for CGT calculation are as follows:
1. Sell your cryptocurrency to fiat Australian dollars
2. Trade to buy other cryptocurrency
3. Buy goods or services using cryptocurrency
• Few capital gains or losses that came from disposal of cryptocurrency which is a personal use asset can be disregarded.
• If cryptocurrency sell is a part of your business, then the profits can be considered as an ordinary income.
What’s is a personal use asset? Cryptocurrency is not a personal use asset if it is acquired, kept or used:
• as an investment
• in a profit-making scheme
• in the course of carrying on a business
Example of a personal use asset: If a furniture shop is offering 20% discount when paid in cryptocurrency, Dave pays $500 to acquire necessary amount of Bitcoin and pays for his dining table on the same day. Given the circumstances where Dave bought and used Bitcoin, it is considered as a personal use asset and do not attract any taxes.
While trading cryptocurrencies, it is common to get involved in analysis, news and memes — but it’s important to keep a record of all trades you do and their buy and sell amount and costs. Few things to be recorded are:
• Timestamp of the transactions
• Value of cryptocurrency in Australian dollars while at the time of transaction
• Reason for the transaction and who’s the other party involved (could be just their address)
Crypto to Crypto Transactions
One of the biggest questions in taxation space while trading cryptocurrency is whether buying one cryptocurrency with another one is considered taxable or not. Answer: IT IS TAXABLE Australian Taxation Office (ATO) has specifically mentioned that while exchanging one cryptocurrency to an another one, it means that you are selling first cryptocurrency and buying a second one. Those were the guidelines mentioned on ATO’s treatment of taxes on trading cryptocurrencies.
1. Crypto is considered as an asset and subject to CGT.
2. When used as a personal asset, it can be disregarded (under $10,000 and used to purchase PERSONAL USE ASSET).
3. When accepted as a part of business — it’s a normal income.
4. Crypto to crypto exchange means selling one crypto and buying another one and is taxable.
The above handy info was taken from one of the trading platforms, I cannot for the life of me remember which - will find it to reference it shortly.