Cryptocurrency has become a popular investment category in recent years. As with any asset, investors must understand their tax obligations, including Capital Gains Tax (CGT), which applies when crypto assets are sold or exchanged. This article will guide you through working out capital gains on crypto when CGT applies and how to report it.
For most Australian taxpayers, cryptocurrency is classified as a CGT asset with CGT payable when certain events occur, including:
Each of these scenarios counts as a CGT event and may result in either a capital gain or a capital loss.
The timing of the CGT event is essential for calculating your tax obligations. Generally, a CGT event occurs when you dispose of your crypto asset, which could be when you:
Other CGT events can include destroying or losing your assets and creating new contractual rights. It's essential to keep accurate records of these events to ensure that your CGT calculations are correct.
To calculate your CGT, you must assess whether you made a capital gain or a loss. Here's how.
Remember, while capital losses can reduce your capital gains in the same tax year, they cannot be deducted from other income.
Once you've calculated your capital gain or loss, the next step is to report it in your tax return.
To make your CGT calculations and reporting easier, it's vital to maintain accurate records of all crypto transactions, including:
You can also use online calculators and record-keeping tools provided by tax authorities to simplify this process.
Paying capital gains tax on crypto may seem daunting but understanding when CGT applies and how to calculate it is essential for every investor. Crypto assets are treated like other investment assets for tax purposes, so staying informed and organized will help you avoid potential pitfalls and ensure a smooth tax season. For more information, visit the ATO's advice on Crypto CGT or contact Ascent Accountants for advice.