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Transacting with cryptocurrency

Most of you would have heard the term cryptocurrency, or at the very least, Bitcoin.

The Tax Office is taking a close interest in what you’re declaring when it comes to digital currencies. And the fact that you didn’t know won’t be an excuse if you receive a data matching audit and a please explain.

As a result, the ATO has issued guidance regarding various tax consequences of transactions involving cryptocurrencies.

According to the Tax Office, Bitcoin and other digital currencies are neither Australian nor foreign currency. Rather, it is an asset for capital gains tax (CGT) purposes.

Cryptocurrency – Investments

Any capital gains made on the disposal of a cryptocurrency (including using the cryptocurrency or converting it to Australian dollars) may be taxed, although certain capital gains or losses from disposing of a cryptocurrency that is a ‘personal use asset’ are disregarded.

The good news is, if you held the cryptocurrency for over 12 months or more, you may be eligible for a 50% discount. Note that companies get no discount and SMSF only gets 33.33%.

Cryptocurrency – Personal assets

Cryptocurrency may be a personal use asset if it is kept or used mainly to purchase items for personal use or consumption (but the longer the period of time that a cryptocurrency is held, the less likely it is that it will be a personal use asset).

Cryptocurrency -Used in business

If the disposal is part of a business the taxpayer carries on, the profits made on disposal will be assessable as ordinary income and not as a capital gain.

With cryptocurrencies now firmly in the ATO’s sights, it’s important to understand the tax implications for any digital currency transactions you’ve made in the 2018 financial year.

If you are unsure, make sure to call one of our boring accountants.

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