Cryptocurrency and the ATO

As cryptocurrency continues to create headlines across the markets, the Australian Taxation Office (ATO) are sharpening their focus on digital assets activity – and it’s important to make sure you stay on top of the tax side of things. 

Does the ATO know about my cryptocurrency holdings? 

Yes, they do. Don’t assume your crypto activity is invisible. The ATO have formal data-sharing arrangements with major Australian (and some international) crypto exchanges, giving them the ability to match information with personal tax returns. This allows them to track your holdings, view transaction volumes, and link such activity to your identity.  

Ensure that you are transparent about the cryptocurrency you have sold and/or exchanged in your tax return, as the ATO are able to data-match crypto activity to your tax return. 

Crypto is taxable – even if you didn’t “cash out” 

A common misconception is that you only need to pay tax when your crypto is converted back into Australian dollars. In reality, a taxable event can occur anytime you dispose of a crypto asset. This includes swapping crypto for another crypto (e.g. BTC for ETH), using it to pay for goods or services, and selling it for fiat currency.

Just like a share sale - each of these events will trigger a capital gains tax (CGT) obligation. 

Is there a difference between cryptocurrency investing and cryptocurrency trading? 

Similar to stock trading and investing, the ATO classifies cryptocurrency holders in one of these categories. 

1. Investors: You’re holding crypto as a long-term asset. Gains are generally subject to CGT, and you may qualify for the 50% CGT discount if you hold assets for over 12 months. 

2. Trader: You buy and sell frequently, operate in a business-like manner, and aim for short-term profits. Your profits are taxed as income, not capital gains. 

This distinction is important for your tax position, and misclassifying your activity could trigger an ATO review. 

Record-Keeping  

Ensure you are keeping detailed records of the following: 

• Dates of purchases, exchanges, and disposals 

• Asset types and quantities 

• Value in AUD at time of transaction 

• Transaction fees 

We encourage you to review the ATO guidance on their website to ensure that you comply with their record keeping requirements. 

Get the right advice, don’t DIY if you’re unsure 

The cryptocurrency space is still relatively new, and the ATO are continuing to refine their guidelines surrounding it. We strongly advise that you work with a tax advisor who understands digital assets, and can help you navigate your obligations accurately.  

Whether you’re investing for the short-term or long-term, being proactive with your record keeping and disclosure requirements could save you from any unexpected tax bills – or worse, an ATO review.  

At IWP, we understand the unique complexities of digital assets, from simple trades to DeFi. Don't risk an ATO audit because of a simple mistake. Our specialists can help you navigate your obligations and ensure you file with confidence.

General Advice Warning

The information in this article is general advice only. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. You should seek independent financial advice to discuss your personal circumstances.