Investing in cryptocurrencies has had significant interest in Australia since Bitcoin launched here in 2017 and are increasingly becoming part of portfolio diversification.  Cyptocurrencies are considered to be property, which makes them a potential trigger for capital gains tax. One question investors might ask is whether it is treated the same as other investments for claiming losses and gains.

The Australian Tax offices has released updated information about how to claim glosses and gains in tax returns.

Gains and losses from the disposal of cryptocurrency should be reported in your tax return in the year that the disposal occurred.

The first point to understand is that gains and losses from crypto are only reported in your tax return when you dispose of it – you sell it, convert it to fiat currency, exchange it for another type of asset, buy something with it, etc. You cannot recognise market fluctuations or claim a loss because the value of your crypto assets changed until the loss is realised or crystallised.

If you made a capital gain on crypto that was held as an investment and you held the crypto for more than 12 months then you may be able to access the 50% Capital Gains Tax (CGT) discount and halve the tax you pay.

If you made a loss on the cryptocurrency (capital loss) when you disposed of it, you can generally offset the loss against capital gains you might have (unless the crypto is a personal use asset). But, you can only offset capital losses against capital gains. You cannot offset these losses against other forms of income like salary and wages, unfortunately. If you don’t have any capital gains to offset, you can hold the losses and carry them forward for another future year when you can use them.

If you earned income from crypto such as airdrops or staking rewards, then these also need to be reported in your tax return.

Cryptocurrency reporting and data-matching capability with the ATO

And remember, keep records of your crypto transactions. The ATO has sophisticated data matching programs in place and cryptocurrency reporting is a major area of focus.

If you’re unsure about what other records you should be keeping or require assistance with claiming either losses or gains, please contact us on 02 957 4033.