Cryptocurrency is a new and exciting technology. It is also an amazing investment opportunity that has already made several people millionaires over a short span of time.
However, if you live in Australia and have made any profits from cryptocurrency investments, it’s essential to understand how crypto is taxed in Australia. You can use a crypto tax calculator to help you with the calculations.
The following article will explain how crypto is taxed in Australia and the best practices to calculate your cryptocurrency taxes.
How Are Cryptocurrencies Taxed?
Australia has the third-highest rate of crypto owners, above 17%.
In Australia, cryptocurrencies are subject to the same tax laws as traditional currencies. The Australian Taxation Office (ATO) is responsible for taxing cryptocurrency.
Cryptocurrency is taxed as a form of property and not in currencies like USD or EUR. Cryptocurrencies are recognized as intangible assets.
These assets are those that have no physical presence and can be divided into two subtypes:
– Intellectual property (e.g., patents, trademarks, copyrights)
– Contracts (e.g., leases, licenses, and security deposits)
Intellectual property is a non-physical item that is valuable for the owner. It includes things like patents, copyrights, trademarks, and goodwill.
Contracts are agreements between parties that are enforceable by law.
Cryptocurrencies are digital currencies and do not have a physical existence. Hence, they are considered intangible assets. While individuals are taxed on their cryptocurrency gains, businesses are taxed on their profits from cryptocurrencies.
The tax on cryptocurrency income is applied in two ways:
1- Capital gains tax (CGT)
CGT applies to the capital gain availed on the disposal of an asset. The gain is the difference between what you paid for the asset and what you sell it for.
2- Income tax
It applies to any income you receive from cryptocurrency transactions. It includes mining, trading, or exchanging crypto for fiat currency.
The value of the cryptocurrency is calculated in Australian dollars (AUD) at the time of the transaction.
When calculating your capital gain, you can use two methods: the market value method or the cost base method.
The market value is the price you sold it, while the cost base is the price you acquired it.
Cryptocurrency is also subject to Goods and Services Tax (GST). GST is a tax that applies to most goods and services in Australia.
It is charged at a rate of ten percent and is added to the price of the goods or services. Businesses registered for GST must charge GST on all sales, including cryptocurrency.
How to Calculate Cryptocurrency Taxes?
There are a few steps to calculate your cryptocurrency taxes.
Step One: Identify Your Capital Gains and Losses
The first step is to identify your cryptocurrency transactions’ capital gains and losses. You need to calculate the gain or loss for each transaction. To do this, you will need the following information:
– Date of the transaction
– Amount of crypto transferred
– the Australian dollar value of the cryptocurrency at the time of the transaction
– Cost of acquiring the cryptocurrency.
Step Two: Calculate Your Capital Gains and Losses for Each Transaction
You will need to calculate your capital gains and losses for each transaction. You can do this step using a crypto tax calculator.
It works by inputting the above information and calculating the gain or loss.
The top features of the calculator are:
– Automatic transaction tracking with the major exchanges
– Auto price updates for each coin
For example, if you purchased Ether at $100 and sold it at $150, your gain would be $50. If you then purchased Bitcoin for $120 and sold it for $90, your capital loss would be $30.
Step Three: Calculate Your Net Capital Gain or Loss for the Year
The last step is to calculate your net capital gain or loss. For example, if you made a total of $50 on Ether and lost $30 on Bitcoin, your taxable net capital gain for the year would be $20. If you made $50 on Ether and lost $60 on Bitcoin, your net capital loss for the year would be $10.
Tips to Trade Profitably in Crypto
The crypto market is susceptible to regulations, adoption rates, and technology changes.
To trade profitably in crypto, you need to:
– Understand the news and events that are affecting the market
– Use a crypto tax calculator to calculate your taxes
– Calculate your capital gains and losses for each transaction
– Assess the value of your crypto portfolio accurately
– Calculate your net capital gain or loss for the year.
Cryptocurrency is a new asset class, and there are many complexities regarding taxation. Make sure you understand how it is taxed in Australia to maximize your profits and minimize your losses.
