CRYPTOCURRENCY

Yes, you can. If you sell your cryptocurrency at a loss (meaning your selling price is lower than what you paid), this generates a capital loss. You can offset these capital losses against any capital gains you make in the same financial year. If you don’t use up the full amount, you can carry the remaining loss forward indefinitely to offset future gains.

Additionally, if your cryptocurrency is lost, stolen, or you’re a victim of fraud, you may claim the loss as a capital loss.

If you’re a cryptocurrency trader (actively trading crypto as a business), your trading losses can generally offset other forms of income earned in that year, subject to specific tax rules.

In most cases, no. There’s a common misconception that you can buy up to $10,000 of cryptocurrency and avoid taxes under the “personal use exemption.” However, this exemption only applies when you genuinely use cryptocurrency for personal expenses, like paying for a holiday or wedding, and the cryptocurrency purchase cost is below $10,000.

If your cryptocurrency cost is above $10,000, CGT will apply regardless of whether you use it personally or not. The ATO frequently checks the validity of these claims, so be prepared to provide proof of your intention.

The taxation of cryptocurrency depends on whether you’re an investor or a trader.

• Investor: If you buy cryptocurrency intending to hold it long-term, profits are subject to Capital Gains Tax. This applies when you sell, trade, gift, or use cryptocurrency to buy goods or services.
• Trader: If you frequently buy and sell crypto aiming for short-term profit, you’re considered a trader. Profits from trading are taxed as ordinary income, not as capital gains. Traders also need to follow specific rules related to trading stock valuation and record-keeping.

Here’s a simple way to calculate your Capital Gains Tax on crypto:

• Step 1: Calculate your gain by subtracting what you originally paid (plus fees) from your selling price.
• Step 2: Deduct any capital losses from the current or previous years.
• Step 3: If you’ve owned the crypto for over 12 months, you can apply a 50% discount on your gain.
• Step 4: The final number is your net capital gain, which gets added to your taxable income and is taxed at your marginal rate.

Transactions considered disposals include:

• Selling cryptocurrency for Australian dollars
• Trading one cryptocurrency for another
• Gifting cryptocurrency
• Using crypto to purchase goods or services

When gifting crypto, the market value at the time of transfer is used for tax calculations.