Don’t Get Caught Short On Your CrYpTo Trades

There are two important things you need to be aware of if you are looking at buying cryptocurrencies 

1.  There is some misconception that there are no tax implications, this is not correct.  Every time you sell you are triggering a tax event.  Every time you make a trade, and by that, I mean selling out of one crypto even if you buy into another it will trigger a capital gain/loss on the one you just sold. The ATO’s view is that it is on capital account, that a capital gain/loss will be triggered unless you are seen to be a trader which I will not be going into this.
How the taxation treatment in Australia works is if you sell out of a cryptocurrency and you have held it for more than 12 months you will receive the 50% general discount which means if you purchase some bitcoin for $1,000 and you sell it for $2,000 you have made a $1,000 gain.  You will be taxed on 50% of this.   If you sell and you have not held it for more than 12 months you do not receive this general discount.  Don’t think you will get away with not declaring as the ATO will not know.  The ATO gets data from many of the crypto exchanges and it now appears on the ATO prefill report. So they know everything.
2.  The next thing you need to be aware of which I believe will catch many people out is if they sell out of one crypto to take profit and put it in another crypto and the value of their holdings plummets they may find themselves in a situation where they have not put money aside to cover the capital gains tax on the gain made.  If they then sell out of the crypto which has made a loss, if you made the loss after 30 June because it is in a  different financial year you cannot offset it against the gain made.  So please be aware of the timing of your buy and sell and make sure you put enough money away to cover your tax on any gains made.
We recommend to our clients a program like to keep track of your gains and losses as you will need to provide this to your tax accountant at the end of the financial year.

If you are needing help understanding the tax implications and getting your tax done you can book in for a free 10-min chat with Paula.

Please speak to a financial advisor if you are seeing advice regarding crypto trading.

* * * Disclaimer: Any information contained within this post is not advice, no advice is given. Hart Partners is not authorised to provide Financial Advice. For Financial Advice you should speak to a registered Authorised Representative of an Australian Financial Services Licensee.