Tax treatments of digital currencies (cryptocurrencies)

Date of article: 6 December 2018
Last updated: 6 December 2018

The Australian Taxation Office has previously treated cryptocurrencies, such as Bitcoin, as a CGT asset – meaning a capital gain or loss from the disposal of the cryptocurrency. The ATO recently confirms and provides additional details.

The capital gain or loss occurs when the following occurs:

  • disposal of the cryptocurrency
  • trade or exchange cryptocurrency (including the disposal of one cryptocurrency to acquire another cryptocurrency)
  • convert cryptocurrency to fiat currency like Australian dollars
  • use cryptocurrency to obtain goods or services.

You must keep records of each cryptocurrency transaction to be able to determine the capital gains or loss. Each cryptocurrency is a separate CGT asset.

Exchanging a cryptocurrency for another cryptocurrency

If you dispose of one cryptocurrency to acquire another cryptocurrency, you dispose of one CGT asset and acquire another CGT asset. As you are disposing one cryptocurrency and acquiring another cryptocurrency, the disposal proceed will equal the acquisition cost. The disposal proceed and the acquisition cost is the market value of the cryptocurrency at the time of the acquisition, in Australian dollars.

The market value of the cryptocurrency in Australian dollars at the time of the transaction can be taken from a reputable online exchange.

Holding cryptocurrency for 12 months or more

If at the time of disposal you have held the cryptocurrency for 12 months or more, you are entitled to CGT discount to reduce the capital gains. The CGT discount for super fund is 33.33%.

Chain splits

If you receive new cryptocurrency as a result of a chain split (such as Bitcoin Cash being received by Bitcoin holders), the cost base of the new cryptocurrency is zero.

Do you need help with your situation or if you wish to discuss the above, please contact us. Our contact details.

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