CRYPTOCURRENCY The new “quid” on the block


Cryptocurrency – is it really a currency?

Currently the ATO does not recognise crypto as a currency. However, this view may change when cryptocurrencies become more widely accepted in the global marketplace.

Ok, so if it’s not a currency, what is it?

The short answer is… it depends on how it’s being used, and what your intention is.  This means it could be classed as either;

  • An asset, similar to shares, bonds and real property.
  • Trading stock, used in your business, or;
  • A combination of both.    


 Then read on, for a basic overview of the current tax treatment of your investment in cryptocurrency, to help you be prepared this tax season.


Firstly, some housekeeping….

Keeping Records

It is crucial to keep accurate records for your cryptocurrency transactions. This will make it easier for your tax professional at tax time, and therefore, cheaper for you!

You may also be asked to provide copies of your records to the ATO, in the event of an audit or dispute, so it makes sense to keep detailed records to substantiate your declarations and claims.

You will need to keep the following information;

  • The date of the transaction
  • The amount in Australian Dollars
  • Details about the transaction – what it was for
  • Details about the other party –  who they were, their crypto address etc.

You will need to keep your record for a minimum period of 5 years.

There are a few handy apps and tools to make tracking your crypto transactions fast and easy.

Current Tax Treatment

Currently, cryptocurrency transactions will be taxed differently, depending on whether the holder is an investor, a “personal user,” or a cryptocurrency trader, most tax payers are likely to fall into the first 2 categories;


An investor is a person who, according to Investopedia “commits capital, with the expectation of financial returns” basically, with the intention of making a profit.

  In this case, the cryptocurrency will be viewed as an asset for Capital Gains Tax (CGT) purposes, much the same as shares, bonds and other real property.

As such, any gain, or loss, upon sale (disposal) of your cryptocurrency, will need to be reported in your income tax return as a CGT event.

If you have held the “crypto asset” for longer than 12 months, then any gain you make upon sale can be discounted by 50%.  The remaining 50% is included as assessable income in your tax return and taxed at your marginal rate. 

If, however, you make a loss on sale, the loss can only be offset against future capital gains events, and is carried forward each year, until such time that it can be utilised.

The bottom line…. capital losses cannot be used to reduce your ordinary assessable income (i.e. wages, salaries, interest and dividends etc.)

Personal Users

Personal users are able to disregard any capital gain made, where the cost base (usually the acquisition cost) of the personal use asset, (e.g. a Boat ) if it was purchased using cryptocurrency valued less than $10,000.  However, the downside is, any loss incurred is also disregarded, but I guess you can’t have it both ways!

This means that you must have acquired the cryptocurrency solely to purchase a personal use asset, in order to access the CGT exemption, for example;

Alex wants to purchase a sound system, he finds the one he wants in an online sale for $9,800 “crypto”, which is less than its Aussie dollar cash payment amount of $10,500, to cash in  on the bargain, Alex opens a crypto account and buys $9,800 value of crypto. The next day, when Alex uses his cryptocurrency to purchases the sound system,  the crypto has increased  in value by 50%, and he has made a gain of $4,400! Does Alex have an obligation to report the gain to the ATO?

Because Alex purchased the crypto with the sole intention to acquire the personal use asset, in this case, the sound system, he will not need to declare the capital gain in his tax return because it is classed as a personal use asset under $10,000.

The fact that the cryptocurrency must have been used or kept primarily for “personal use or enjoyment,” has caused taxpayers a considerable amount of confusion. According to their blog, the ATO are due to release an up- to-date  “Personal Use Asset” definition,  which will provide more clarification, in the next few weeks. We will update you as soon as it’s released.

In summary …. If you have purchased cryptocurrency with a view to make a profit, in course of carrying on a business, or as an investment, then it is not classed as a personal use asset, and it is not exempt from CGT, regardless of whether your crypto cost base was less than $10,000, or not.

Cryptocurrency Traders

What makes a cryptocurrency trader different from a cryptocurrency investor, especially when both have the intention to make a profit?  A few indicators are;

  • You have a high volume of buy & sell transactions – the higher the amount of sales and purchases, the more likely you are to be “carrying on a business” as a trader
  •  You will have a business strategy, spend a significant amount of time on study and analysis of long term trends, and keep detailed records of your transactions, just like you would in any other business.
  • The amount of capital you have invested is not a necessarily a major indicator that you are carrying on a business.
  • Income from your crypto trading activities, is your main source of income…… i.e. you have no other employment or self-employment income

If you are classified as a cryptocurrency trader, you will include your Cryptocurrency sales as business income in your tax return and your cryptocurrency purchases as cost of sales.

  You will also be required to include the” value “of any cryptocurrency you have “on hand” at the 30th June, as assessable income, even though you haven’t actually sold it.

As you are operating a business you may be able to claim other operational expenses such as;

  • Bank and Trading Fees
  • Accounting & Financial Planning Fees that relate to your business
  • Publications, subscriptions and software costs
  • Home office, stationary, & a percentage of internet and telephone costs
  • Seminars, training & travel expenses

Unlike, cryptocurrency investors, your trading income will be treated as ordinary income and included in your tax return as assessable and taxed at your marginal rate. Further, any loss incurred, may be offset, subject to non-commercial loss provisions, against any other assessable income (i.e.  wages and self-employment income) to reduce your income tax liability.

There is also the opportunity to cash in on the small business income offset, allowing you to access a potential tax saving of up to $1,000.


From 1 July 2017, sales and purchases of digital currency are no longer subject to GST.  However, this is currently under review by the ATO.

Generally, where you are not “carrying on a business”, there are no GST implications, if you are simply purchasing goods and services, online, or instore, in cryptocurrency.

Where you are carrying on a business, and you receive cryptocurrency in return for goods and services you will need to keep a record of the amount received in Australian dollars, and you may be required to charge GST and report to the ATO.  You may also be able to claim GST credits on any purchases you made in the course of your business……. We will discuss GST more in our next blog……..

ATO – What they doing to pick up crypto transactions….

Because cryptocurrency transactions on the distributed ledger are public,  this means transactions can be traced back to an individual’s wallet address, making it easy for the ATO to identity any gains or losses that have occurred during the financial year.  Even transactions involving highly secure “anonymous” cryptocurrencies like Monero can be tracked.

The ATO has highly sophisticated data matching technology, which will enable it to track and trace any use of cryptocurrencies within Australia. The ATO can also obtain data from overseas Tax Collection Agencies.

In fact, the ATO can undertake deemed assessments, if they believe taxpayers have not declared profits from crypto transactions, in cases where profits were not disclosed, but net asset wealth increased significantly.   They are able to use data matching technology to track purchases of assets, such as boats, cars and real estate, and deem that income was generated to facilitate the purchases.

The ATO also has the ability to  access taxpayers bank accounts to identify any unusual transactions.(e.g. via Austrac)


If you fail to declare gains or profits from your cryptocurrency transactions in your income tax return, to the ATO, the penalties can be harsh.

You will be required to pay the shortfall amount of tax, shortfall interest charges, plus a penalty of between 25-75% of the shortfall tax amount.  You could even be prosecuted, making it even more important to seek expert advice from your tax professional this tax time!

There are a number of opportunities available to legally minimise tax on cryptocurrency transactions. These include use of different operational structures, such as;

  • Trusts – Discretionary or Unit Trust
  • Private Company
  • Partnership
  • SMSF’s

There are also other opportunities involving negative gearing, and changes in tax treatments, which can save you tax.

Book an appointment with your tax professional to discuss how you can structure your affairs to minimise your tax liability.


The material published electronically in this article is general in nature and does not constitute financial advice.  We do not guarantee that the information is complete or correct. We do not accept any responsibility for loss or damage suffered by any person or body relying directly or indirectly on any information contained within this site.

We do not accept any liability for any financial decisions made on the basis of the information provided. We recommend you seek professional advice, and take into account your particular investment objectives, financial situation and individual needs before proceeding with any financial decisions.

Cryptocurrency Mining : Business or Hobby?

Mining is another way to generate some income in cryptocurrency and with any income generating enterprise, taxes are inevitable. However, calculating your tax liability would depend on the analysis of your activities as whether you are carrying on a business or not.

Mining as a Business

There is no definitive factor in determining whether one is running a business or not. However, the ATO has released some guidelines to consider.

If you have made a decision to start a business and you have taken steps to operate like a business (ie getting an ABNor registering your company name), then you most likely running a business. If you intend to make a profit or if you have been repeating the same activity many times then you are most likely running a business as well. The size of your mining activity and the planning and executing of your actions like a business would also likely constitute as running one. 

Any income derived from mining cryptocurrency as a business then your tax liability will be treated in the same way as other businesses. This means that all income derived from mining including from the transfer of the mined bitcoin to another party or the disposal of such coins would be part of your assessable income.

In the event that you have decided to keep the coins and that its value has increased at the end of the financial year, then the increase of the value would also be considered as assessable income.

Any expenses incurred as a direct result of mining (ie electricity costs, purchase of hardware, internet ulitility bill) can be deducted form your taxable income.

Mining as a Hobby

If you are mining as hobby and not as a business, then any income derived from it would be subject to Capital Gains Tax. You would not be able to deduct any expenses incurred from mining as no deductions are allowed when calculating for CGT.

Now even if the value of your mined coins are less than $10,000, the personal asset use exemption would not apply. The primary situation that the ATO considers as a personal use are assets that are kept or diposed for your personal use or enjoyment. In mining cryptocurreny, the main use of the coins are not for personal use or enjoyment. 

Get the best advise regarding crypto tax questions by contacting one of our experienced Tax Specialists. 

Crypto Tax Myths – I’ve only withdrawn Less Than $10,000 so it’s Tax Free

Ever since the Cryptocurrency revolution started gaining traction all over the globe, an unprecedented level of public interest has now triggered some governments to introduce Cryptocurrency taxation laws. While the majority of the nations of the world are still treating Cryptocurrency as a tax free asset, countries like Australia have started introducing and/or modifying existing laws to cover crypto-taxation.

The topic of taxation of cryptocurrencies is a controversial one, with the global crypto community having mixed feelings about the same.

So what’s the Current Scenario like?

As mentioned before, the global crypto-community is divided on whether Cryptocurrency taxation is justified, as for some, it goes against its defining characteristic of decentralisation. Part of the challenges faced by both Australia’s tax payers and the Australia Taxation office is the existing legislation which has not been updated adequately to cover all Cryptocurrency related assets and projects.

 Apart from some recent amendments made to the GST legislation, there is a general lack of official recognition or regulation when the ATO is concerned. This, however, does not exempt cryptocurrencies fully, as other taxation laws may apply to transactions involving any form of cryptocurrencies. The general misconception or misinterpretation of Australian Tax laws can land people into trouble, and should be made aware to every concerned individual or business entity out there. The ATO has released non-binding taxation guidance for cryptocurrencies and related assets in late 2017 which can be found here.

So How Do Taxation Laws Apply to Cryptocurrencies like Bitcoin or Ethereum?

Being in the dark about how different tax laws may apply to cryptocurrencies can be dangerous for both traders and investors. In recent years, the ATO has published its set of interpretations of how the existing income tax and GST laws should apply to the growing population of Cryptocurrency enthusiasts, both traders and investors. Primarily, the Australian Taxation Office is focussing on Bitcoin and how taxation laws apply to it.

The following are some instances where taxation laws apply to cryptocurrencies.

  1. Income Tax and it’s relation with Cryptocurrencies

When it comes to income tax, there is no official legislation by the ATO on the subject, however, in 2014, the ATO explicitly published its views on how income tax should apply on cryptocurrencies such as Bitcoin. Contrary to popular belief, the ATO does not categorise cryptocurrencies under any foreign currency, but consider it to be “property” for taxation rules. The income tax guidance issued by the ATO is however in direct conflict with the ATO’s GST ruling, where Bitcoin and related assets are treated as money for GST taxation. The Australian Government has not modified the income tax guidance, which have left many in the dark. It has however introduced “private binding ruling” for some tax payers relating to cryptocurrencies.

  • Do Capital Gains Apply to Cryptocurrencies?

According to TD 2014/26, Bitcoin and all other cryptocurrencies are considered as Capital gains and hence classified as a CGT asset. In this context, CGT rules will be applied when the proceeds from the disposal of any Cryptocurrency exceeds its base price. However, in the case of any personal Cryptocurrency usage, like purchasing other assets, both capital gains and capital losses shall be disregarded and hence non-taxable.

For example, if an individual purchases any Cryptocurrency from an exchange and uses it to make online purchases for personal use such as clothing or music, the underlying asset is considered as a personal asset and will be exempt.

** It should be noted that the above laws apply only if the first element of the Cryptocurrency cost base is less than or equal to $10,000

  • Do Anti-Money laundering laws Affect Cryptocurrencies?

As recently as December 13th 2017, law makers have made a significant modification to the existing Anti-Money Laundering and Counter-Terrorism Financing Act 2006  with the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017. This was done to extend the coverage of the existing laws to properly regulate Cryptocurrency institutions, including digital currency exchange providers.

They have also set aside a set of certain criteria in order to qualify:

  • Mandatory Registration with the Australian Transaction Reports and Analysis Centre.
  • Compulsory presence of a program to mitigate and manage money laundering or terrorism financing risks.
  • Conducting appropriate KYC for proper identification and verification of customers. 
  • Reporting and conducting due diligence on transactions which exceed $10,000

So, what are the exceptions to this rule?

In spite of all the stringent rules in place for taxing cryptocurrencies, the ATO does allow some discounts of exemptions in certain cases. These are explained in brief below,

  1. Individuals who are Australian Residents shall receive a 50% CGT discount if the Bitcoin has been held for a period exceeding 12 months.
  2. Bitcoin or other cryptocurrencies which have been purchased with the intent of personal use or consumption (such as purchasing food, clothing) etc., all capital gains will be exempt.

The Bottom Line

The world of cryptocurrencies is still a relatively new concept which is slowly being understood by most governments and lawmakers around the world. On paper, tax treatments of cryptocurrencies do not differ greatly from traditional taxation. However, it is quite evident that the current laws on taxation need to be amended to a great degree to include the proper regulation of cryptocurrencies. As more and more institutional investors, major banks and government programs look towards blockchain technology, the need to regulate such borderless online transactions is a necessity in the future.

So as far as the present scenario is concerned, the current Australian tax law does not state anything explicitly. For instance If a trader purchases cryptocurrency assets under the guise of a personal use asset, then any profit or loss on the disposal of the asset is tax-free. It should be noted, however, that the ATO has very strict guidelines for ‘personal use asset’ classification and would be very hard in most cases to prove that. Individuals are thus advised to consult with tax firms who specialise in crypto-taxing to avoid unnecessary losses.

Avoiding ICO scams

With the ever increasing number of white papers being released, ICO scams are on the rise and the trend shows no signs of slowing. To help protect yourself, we have compiled some tips on how to spot scams and how to avoid them.

Study the White Paper

If the promises are too good to be true, mostly likely it is. A product that offers unbelievable returns in a short amount of time or a shallow or incomplete white paper is a major red flag. The white paper should detail the working plan and the technology behind the ICO – and such technology or product should be viable and doable. ICOs that talk about “genius” idea but are lightyears away from execution should ring alarm bells.

Jared Psigoda, CEO at Bitguild, said that “Never invest in a project that talks about the potential future value or returns of their token. Ignore hype and look at actual progression on stated milestones.”

Study the Team

Do a detailed background check on the team to see if they are real people or if they are really connected to the ICO. Some scammers would use names of real ICO advisors so it is important to double check whether such ICO advisors are really connected to the project (a simple linkedin search on the advisor is a big help).

An anonymous group of team members is a sure fire way of knowing that an ICO is a scam.

Don’t believe everything you read in the web

Scammers know how to utilize social media to push fake reviews and recommendations so it would be wise to scrutinize every postive post about the ICO. To be safe, follow the recommendations of people and sites that you trust. In traditional investments, investors support the founders and members they personally know and believe in.

At the end of the day, if you are not 100% sure about an ICO, then do not go through with it. It is better be safe than sorry. 

Are Accountants just Accountants, what about Bitcoin?

Choosing the Right Accountant

Choosing the Right Accountant is just like choosing the service of other professionals such as doctors or lawyers. People would normally choose someone who is registered, competent and who can give you the best value for your hard earned money. 

In today’s complex word, finding the right accountant becomes a challenging task due to ever changing laws and regulations governing taxation, finance, record keeping and Accounting practice. It is important then, that your Accountant should have the relevant experience in dealing with your specific needs.

General Accountants and Specialized Accountant

This analogy would help us better understand the difference between a General Accountant and a Specialized Accountant.

We all have gone to a doctor’s visit. Normally, a patient would come in to the clinic, and would consult with a General Practitioner – someone who has undergone medical training and has a general understanding of Medicine. If we are lucky, the doctor would just prescribe us some medicine for our illness.

However, there are instances wherein our GP would refer us to a Specialist (i.e. Surgeon, Cardiologist) because he does not have the relevant knowledge and experience to handle our case. A General Practitioner is not trained and equipped to perform heart surgery in the same way that a Heart Surgeon is not prepared to take on a brain related illness.

This is true in the case of Taxation. A General Accountant would be able to assist you with your general accounting needs but you would need a Registered Tax Agent to lodge your tax returns. A Registered Tax Agent has more experience, has more knowledge in dealing with the complexities of tax rules and regulations, and is better equipped to handle your tax needs.

Becoming a Chartered Accountant

Becoming a Chartered Accountant is a long and tedious process as it is considered as a post graduate degree in Accounting field. For starters, one should have a relevant Bachelor’s degree (AQF level 7 or higher) with coverage of required competence area.

Accountants would need to apply to the Accountant Chartered Program wherein they have to finish the Graduate Diploma of Chartered Accounting (GradDip CA). They then must gain at least 3 years full time approved employment in a relevant Accounting role. They must also complete a practical experience under a recognized mentor.

Cryptocurrency Taxation as a Specialization

Cryptocurrency is a relatively new and booming industry. Due to its emergence into the mainstream, the rules and policies in place for its tax treatment can be subject to changes and revisions by the governing bodies. There are also a lot of technical terms (i.e. blockchain, forks, mining, airdrops) that are generally unknown to most Accountants.

Given all of these, you would need someone who not only has the specialization in taxation, but someone who will understand when you are talking about ICOs, someone who can answer your questions about the tax treatment of coins from a hard fork, someone who can help you navigate the taxation events of your trades across a range of exchanges, and compile it all into a report for you.


Finding the right accountant is like finding the perfect pair of jeans. Such a person should be qualified and be registered, should provide the best value for your money, and should fit perfectly with your needs. Not all Accountants are equal, so you should find one who has the right specialization, and correct relevant experience.

For all of your crypto tax needs, please contact one of our specialized and experienced Cryptocurrency Tax Accountants. We offer the convenience of an online Accountant service, so we can help you no matter your location.

Want to retain your current Accountant, but they don’t know what Bitcoin is? Let us do the tricky stuff.

We are happy to collect all of your crypto data, and compile a crypto tax report, that you may then supply to your existing Accountant. No cryptocurrency knowledge required by your Accountant.

Get in touch with us to start the simple process.