In this article, we’ll teach you how to avoid tax on cryptocurrency in Australia.
Cryptocurrency has undoubtedly exploded in popularity in recent years, but how does cryptocurrency taxation operate in Australia?
With governments throughout the world pushing down on cryptocurrency’s tax ramifications, you’d have had to start declaring bitcoin on your annual tax return.
It’s no different in Australia, where the Australian Tax Office wants to know if you’re buying, selling, trading, or even mining cryptocurrencies.
How do you get taxed on Cryptocurrency in Australia?
Simply put, the ATO does not consider cryptocurrencies to be conventional fiat cash for crypto taxation in Australia.
Instead, cryptocurrency tax is typically treated and taxed the same way as other assets such as stocks.
Does the ATO Track Cryptocurrency?
Yes. The ATO keeps track of bitcoin transactions that are linked to specific people.
The ATO requires exchanges operating in Australia, such as Binance and Coinspot, to record the details of their Australian users.
Why do you Pay Tax on Cryptocurrency in Australia?
If you bought tax on cryptocurrency as an investment and then used it to pay for goods and services,
This would be considered the disposal of the cryptocurrency, and you would be subject to GST.
The Cost of Crypto Tax after a Year in Australia
If you sold tax on cryptocurrency or used it to buy goods and services, you will owe taxes if the realized value (the sale price of bitcoin, for example) is more than the price at which you bought bitcoin.
There’s a chance you’ll have a capital gain that’s taxable at both short- and long-term rates.
Our crypto tax calculator determines how much CGT you’ll have to pay when you sell or swap your bitcoin asset.
You’ll need to supply some information about your crypto asset to use this calculator. These have been described in detail below:
Sold price – This is the whole AUD worth of the asset you sold, for example, if you sold Bitcoin for $15,000 or traded Bitcoin for ETH with a $15,000 value.
Cost basis – This is the price you paid for the cryptocurrency you’re selling, as well as your total investment in AUD, including any fees or other expenditures.
For example, if you paid $5,000 for Bitcoin or swapped $5,000 worth of ETH for Bitcoin, your cost basis is $5,000.
Taxable income: This is your total taxable income for the year you sold the crypto asset, including your wage and other sources of income. This allows us to calculate the tax rate that will be applied to your cryptocurrency capital gains.
Length of Ownership — If you have owned the crypto asset for more than a year, you are eligible for a 50% CGT discount, which means that only half of the capital gain is reflected in your taxable income.
After you’ve provided all of the above information, click the ‘Calculate’ button to get an estimate of how much CGT you’ll have to pay on your cryptocurrency asset sale.
5 Ways to Completely Avoid Tax on Cryptocurrency in Australia
Invest in cryptocurrency through an IRA.
By acquiring bitcoin in a self-directed IRA, you may be able to invest in cryptocurrencies tax-free.
Most IRAs allow you to invest in traditional stocks, mutual funds, and ETFs (ETFs). Self-directed IRAs are a type of IRA that allows you to invest in unique assets like bitcoin, precious metals, and real estate.
Declare your cryptocurrency as a source of income.
Taxation differs depending on whether you receive bitcoin in return for products and services or mine tax on cryptocurrency.
When you get cryptocurrencies in certain situations, it is recognized as income.
You must keep track of the fair market value of the bitcoin you got and report it on your tax return as income.
Keep your cryptocurrency for the long haul.
You usually do not owe taxes on cryptocurrencies until you sell them if you are holding them as an investment and are not making any revenue.
You can completely avoid paying taxes if you don’t sell any during a given tax year.
Watch the video below to know how to avoid tax in cryptocurrency in Australia:
Sell assets during a year with a low income.
Whether you have short-term or long-term capital gains, the tax rate you pay is determined by your income.
Your tax rate will be reduced if your taxable income is low. You may be able to save money on taxes by selling taxes on cryptocurrencies that you anticipate will appreciate in years when you will be paying taxes at a lower rate.
Keep it and don’t sell.
If you don’t require access to the money you’ve put into your tax on cryptocurrency, you might utilize it to develop generational wealth.
For this technique to work, you must trust in the long-term worth of a cryptocurrency, but it could provide favorable tax treatment.
The ATO has substantial data matching capabilities, which will undoubtedly be one of their main areas of attention.
If you do not record any cryptocurrency transaction income, you may be audited by the ATO at a later date.