Crypto Assets and Tax: Are You Reporting Correctly?
Crypto assets are not exempt from tax.
Whether you hold Bitcoin, Ethereum or other digital assets, it is important to understand how your transactions are treated for Australian tax purposes and what needs to be reported.
The tax treatment depends on how you acquire, hold and use the crypto asset. For many investors, the capital gains tax (CGT) rules will apply. Different treatment may apply if you are carrying on a business, actively trading, staking crypto or receiving airdrops.
Crypto Assets Are Not Tax Free
For Australian tax purposes, crypto assets are generally treated as assets rather than money.
For many individuals who buy and hold crypto as an investment, the crypto will be treated as a CGT asset.
This means a capital gain or capital loss may arise when the asset is disposed of.
If you are using crypto as part of a business or trading activity, however, different income tax treatment may apply. Our taxation team can help determine the appropriate treatment based on your circumstances.
When Is a Crypto Asset Disposed Of?
A common misconception is that tax only needs to be considered when crypto is converted back into Australian dollars. That is not necessarily the case.
A CGT event may occur when you:
sell a crypto asset
trade, exchange or swap one crypto asset for another
convert crypto into Australian dollars or another currency
use crypto to purchase goods or services
gift or donate a crypto asset.
For example, exchanging Bitcoin for Ethereum can trigger a CGT event even though no Australian dollars have been received.
If you move crypto between wallets that you own while retaining ownership of the asset, that transfer will generally not itself be a disposal.
The timing of the transaction is also important. If you dispose of Bitcoin in December 2026, for example, the transaction generally falls within the 2026–27 income year.
Working Out a Capital Gain or Loss
When a crypto asset held as an investment is disposed of, you generally need to compare the capital proceeds with the asset’s cost base.
If the disposal proceeds exceed the cost base, you may have a capital gain.
If the asset is disposed of for less than its cost base, you may have a capital loss.
Capital losses can generally be applied against capital gains, subject to the CGT rules, and unused capital losses may be carried forward.
Depending on your circumstances and how long the asset has been held, a CGT discount may also be available.
Accurate records are therefore important when there have been numerous purchases, sales, exchanges or transfers.
What Records Should You Keep?
Record keeping is often one of the more difficult aspects of investing in crypto.
For each crypto asset and transaction, you should retain sufficient information to establish what occurred and calculate the Australian tax consequences.
This may include:
the type and quantity of crypto asset
the date of each transaction
the nature of the transaction
purchase and disposal records
exchange transaction histories
the Australian dollar value at the time of the transaction
associated transaction and professional costs
wallet records and relevant addresses.
It is also important to retain records from crypto exchanges.
Do not assume that an exchange will keep your complete transaction history indefinitely. Regularly exporting and securely retaining your transaction data can make preparing your tax return considerably easier.
Good record keeping is particularly important where crypto transactions form part of broader accounting and financial records.
What About Staking, Airdrops and Crypto Trading?
CGT is not the only tax issue that can arise.
Staking rewards and certain airdrops may be assessable as ordinary income when received, with separate CGT consequences potentially arising when the resulting crypto asset is later disposed of.
Different rules may also apply where your activities amount to carrying on a crypto trading business rather than simply investing.
The distinction can materially affect how income, expenses, gains, losses and crypto holdings are treated for tax purposes.
If you use crypto within a business, receive staking rewards, participate in decentralised finance arrangements or undertake a large volume of transactions, it can be worthwhile obtaining advice before preparing your return.
Crypto Tax Can Become Complicated
A relatively small number of transactions can become difficult to reconstruct once swaps, multiple exchanges, wallets, staking rewards and different crypto assets are involved.
The key is not simply knowing how much crypto you currently hold. You need to understand the tax treatment of the transactions that occurred along the way.
At PRATT Partners, we assist clients with taxation, CGT and the tax treatment of investments and business transactions.
We work with clients across Sydney, the Gold Coast, Brisbane and throughout Australia.
Need Help With Crypto Tax?
If you hold or have disposed of crypto assets and are unsure whether your transactions have been reported correctly, contact PRATT Partners to discuss your circumstances.
We can help review your transaction history, identify the relevant tax treatment and assist with your Australian tax reporting requirements.
This article provides general information only and does not take into account your individual circumstances. Tax outcomes depend on the facts of each transaction and appropriate professional advice should be obtained where required.
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