Cryptocurrency Decrypted

Cryptocurrency has recently become a buzzword for investors. While many are discussing the atmospheric rise in popularity of digital currencies, they are not considered to be ‘currency’ by the ATO for tax purposes. According to a latest report, 31% of the Gen Z population in Australia own Crypto Currency and they are expected to overtake fiat currency in the future as Reserve Bank of Australia is talking with other central banks about the viability of a “central bank digital currency” for retail use.

Here is a summary of the tax treatment of cryptocurrencies:

1) Asset

The ATO taxes cryptocurrency as an asset and its price changes in AUD over time. This means that there are tax consequences related to the acquisition and disposal of a unit of cryptocurrency and the tax implications depends on whether the asset was held as an investment or personal asset.

2) Capital Gains Tax Events

Like any other investment, any capital gain or loss on disposal of your cryptocurrency is taxable when you sell, trade or exchange cryptocurrency for another or convert cryptocurrency to AUD.

  • Australian residents holding the asset as an investment for a minimum of 12 months are eligible to claim the 50% CGT (capital gains tax) discount.
  • If you sell or exchange cryptocurrency to acquire any other cryptocurrency, the capital proceeds from the disposal is estimated using the market value of the asset you disposed of and gain or loss from the transaction is calculated accordingly.
  • Capital losses in cryptocurrency investments cannot be offset against other income types like a capital loss from any other investment.
3) Personal Use Exemption

The ATO accepts that cryptocurrency is a personal asset if your purpose for acquisition was to exchange for other goods/services instead of for making a profit. This personal asset will then be exempt from capital gains tax. Since intentions are subjective, this can be difficult to prove that you are holding the asset not as an investment or while carrying on a business. Also, capital gains from personal use assets acquired for less than $10,000 are only disregarded for CGT purposes.

4) Cryptocurrency in Business

When purchasing goods or services with cryptocurrency to run your business, the AUD value of the payment which is the fair market value for that currency will be accounted for in the same way as paying the equivalent amount in cash identical to other assets or items used in your business.


The ATO requires, the owners of these digital assets to keep records showing:

  • Dates of the purchase and sale of cryptocurrency
  • Value in AUD of each transaction
  • Identity of other party in transaction (their cryptocurrency address)
  • Nature and purpose of the transaction

Since cryptocurrency transactions are always recorded electronically, the retention of records regarding the first three items should not be a hassle. The last item is most open to ATO interpretation, so it is critical that proper documentation is maintained of intentions from the outset.

ATO Data Matching

The ATO obtains data related to cryptocurrency transactions and account information from designated service providers (DSPs). This is used to identify the buyers and sellers of crypto-assets and quantify the related transactions. They are matching the data provided by DSPs against ATO records to identify individuals who may not be meeting their registration, reporting, lodgement and/or payment obligations.

With all the new reporting requirements and ATO data matching and if you have any questions please don’t hesitate to contact us.

Written for you by Aarthy Kumar

The information contained on this website and in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website and in this article are of a general nature only and are based on our interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

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