Unless you’ve been under a rock for the past few weeks, the end of 2017 has been all about Bitcoin. While the last few hours have seen the price drop a little, the value of the leading ‘cryptocurrency’ has actually been skyrocketing.
Bitcoin may be on everybody’s lips, but do you actually know what it is? Basically, it’s a completely decentralised digital or virtual currency – and it’s particularly popular and trendy right now. As well as the soaring price, those who love it avoid high transaction fees, enjoy the flexibility, speed and anonymity, and more than traditional currencies.
But because it’s basically unregulated, some have wondered what the Australian tax authorities think of Bitcoin. Specifically, how will the ATO regard those Bitcoin and other cryptocurrency investments and transactions?
We answer some of your top Bitcoin tax questions:
1. Is Bitcoin subject to GST?
Unless you are operating a bitcoin exchange, as of 1 July this year, the answer is no and this applies to both sales and purchases of cryptocurrency.
2. How does the ATO regard a Bitcoin transaction?
The ATO treats Bitcoin transactions in the same way that it treats barter arrangements. That’s because the government doesn’t see Bitcoin as an actual currency.
3. Does that mean Bitcoin is not subject to capital gains tax?
No. Although not actually money, the ATO does regard Bitcoin as an actual asset and is therefore subject to capital gains tax. If you buy things with Bitcoin, any capital gain is disregarded if the value is less than $10,000, but if the ATO regards your Bitcoin foray as a profit-making enterprise, any profits will be taxed.
4. What about Bitcoin and income tax?
As long as you’re not a business and all you’re doing is transacting in Bitcoin for personal use items, you may not need to worry about income tax. If you are in business, Bitcoin you receive for your goods or services is regarded as taxable income in AUD, and it’s also subject to GST. Similarly, though, a business can claim input tax credits on that GST.
5. Do I need to keep Bitcoin records?
If you transact in Bitcoins, you do need to keep some records. These include noting the date, the value in AUD, what the transaction related to, and who (or what Bitcoin address) you transacted with.
6. What about Bitcoin and deductions?
If you use Bitcoins to buy things for your business, you can claim a deduction for the amount in AUD. But if it’s just a personal investment, you won’t be charged income tax but equally, you can’t make any deductions for losses.
7. What about Bitcoin and fringe benefits?
If you pay staff in Bitcoins rather than in AUD, the payment is regarded as a fringe benefit or normal income – depending on the specific arrangement between employer and employee.
Especially as an expat, filling out your Australian tax return can be complicated – even before you get stuck into the weird and wonderful world of Bitcoin! To deal with actual expats who know exactly how to handle Australian expat tax returns, get in touch with Expat Tax Services today.
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Comments 9
I have a client who is set to leave Australia and cease to be a Australian resident. He has crypto and the question is, are their CGT implications on these assets once he leaves Australia?
Author
Hi George,
Thanks for your question. The answer though is not as straightforward as it seems though. Yes, typically there will be CGT implications on a person ceasing to be a tax resident of Australia when they hold crypto assets. Often it will cause the taxpayer to pay capital gains tax on the unrealised gains in their investments, in most, but not all cases.
Ultimately the strategy to be undertaken and the advice you should offer in relation to this scenario will depend upon the client’s tax profile, when they are leaving Australia, what their intentions are in relation to their crypto assets (continue to hold or dispose of sometime soon), where they will relocate to, and whether a tax treaty applies, and how their new country of residence views and taxes crypto assets. All of that needs to be considered thoroughly in order to satisfactorily advise your client.
Thanks
Shane
Hello,
I have been investing in cryptocurrrency since 2017 but have not been an Australian resident for taxation purposes since 2015.
Do I have to pay CGT on any of my crypto gains 2017-2020?
Thank you
Hi Robert,
Thanks for your question.
Non-residents for tax purposes are taxable on capital gains from taxable Australian property. Crypto currency is not Australian taxable property so any gains you make while you are a non-resident will not be taxable in Australia. Unless you already owned those assets when you were an Australian tax resident.
Regards
Terryn
Hello.
Similar to above (Robert), I left Australia in 2013. Bought crypto in 2017 and sold in 2021. Presumably I dont need to pay taxes on those gains?
I also have a managed fund. I did lodge a tax return in 2013. The fund has reinvested in additional units over the years. To my knowledge the fund is not taking withholding taxes. Do taxes apply here? The funds are not related to property. Reading the ATO definition at face value
pay capital gains tax (CGT) only on your taxable Australian property, my assumption to date has been no. Can you clarify?Thank you.
Wil.
Hi Wil,
If those crypto assets were acquired while you are a non-resident for Australian tax purposes and sold whilst you are non-resident then the gain or loss on disposal will not be included in your Australian tax return.
Any units that have been reinvested (acquired) after you were a non-resident, will not be subject to capital gains tax if sold while you are non-resident. If you had the managed fund before you ceased being an Australian tax resident the gain will be subject to Australian capital gains tax unless you included the deemed capital gain/loss in the year you ceased being a resident.
Tax may apply on the income you receive from the fund, it depends on the type of income that is distributed to you. You would need to review their annual tax statement to determine this.
If you need more information get in contact with one of our team.
Regards,
Terryn
Thank you for your reply.
The majority of the Capital gains are NTAP, so these are exempt in my case.
There is also a column called Other Capital Gains Distribution NTAP ( This represents the total amount of cash distributed in relation to all capital gains not already reflected in the capital gain amounts above.)
Presumably I need to pay tax on this figure?
Best wishes
Hi Wil,
If the distribution relates to NTAP then it will be exempt income and not taxed in Australia. Each fund is a bit different so I’d need to review the tax statement and instructions to advise the tax treatment for you.
Regards,
Terryn
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