Guidance issued by the Australian Tax Office specifies that virtual currencies are subject to capital gains tax (CGT) when the asset is disposed, such as sold, traded or used to purchase items. You will make a capital gain if the value of the asset at the time of disposal is more than the value of the asset upon acquisition.
Note: if you are a professional trader, then trading stock tax treatment may apply instead of capital gains tax treatment.
Personal Use Assets: Cryptocurrency can be a personal use asset if it is kept or mainly used to purchase items for personal use or consumption, usually acquired and used within a short period of time. Cryptocurrency is not a personal use asset if it is used mainly as an investment, used to generate profit, or used in the course of carrying on a business. Capital gains or losses from the disposal of personal use cryptocurrency may be disregarded.
Cryptocurrency as an investment: If cryptocurrency is held as an investment, you are not entitled to the personal use asset exemption. You may be entitled to the CGT discount to reduce the capital gain. If you have a net capital loss, it may be used to reduce a capital gain in later years.
Businesses: Cryptocurrency held for sale or exchange in the ordinary course of business follows trading stock rules instead of CGT rules. Proceeds from the cryptocurrency are taxed as ordinary income, and related costs are deductible.
Loss or theft of cryptocurrency: to claim a capital loss on lost or stolen cryptocurrency you must be able to provide the following kinds of evidence:
- When you lost the private key
- The wallet address
- Cost you incurred to acquire the cryptocurrency
- Amount of cryptocurrency in the wallet at the time of loss
- You had control over the wallet or have possession over the hardware that stores the wallet
- Transactions from an exchange to the wallet is linked to your verified account
Forks: No income is incurred in the event of a cryptocurrency fork. The cost basis is $0 and capital gains will apply at the disposal time of the coin(s). If the forked coin is held by a business, it will still be treated as a trading stock. The asset must be brought to account at the end of the income year.
Note: Lumina is intended to serve as an informational and assistive tool only. Lumina is not intended to substitute for professional tax, accounting, audit, or legal advice. Information provided on Lumina is subject to change without notice. Lumina is not responsible for the accuracy of your tax, audit, or legal compliance. Please consult a licensed professional for financial, tax, and legal advice.