CoinJar co-founder and CEO Asher Tan explains the key things you need to know.

Cryptocurrency use has grown exponentially in the last two years and Australians have embraced cryptocurrencies as a way to spend, send and trade money from anywhere in the world. Today Australia is the world’s 11th biggest market for bitcoin volume.

It comes as no surprise, therefore, that governments around the world are becoming increasingly focused on the tax consequences of the digital currency trend.

This year, the Australian Taxation Office (ATO) created a specialist taskforce to look at new ways to tax the asset class, with data-matching audits on the horizon to trace transactions to individual taxpayers.

So, with end of financial year approaching, it’s important to understand the tax implications for any digital currency transactions you have made in 2018. Here are our three tips for EOFY:

1.     Keep accurate records

The ATO in Australia views cryptocurrencies as assets, not currency or commodities, and therefore any financial gains made from the selling of digital currencies will generally be subject to capital gains tax (CGT) and must be reported to the ATO.

According to the ATO, there are two key reasons for an individual to purchase bitcoin – personal use or investment, and how you are taxed will depend on which category you fall into. Therefore, it is important to keep careful records of not only what you purchase but why.

If you are an everyday user of cryptocurrency, keep track of all purchases, trades and transactions. If you are a cryptocurrency trader, every buy and sell order must be recorded, just as you would record any share trades.

2.     Know the CGT rules

Many cryptocurrency traders mistakenly think their profits are tax free, which is not the case.

Digital currencies purchased for less than $10,000 and used for personal use, for example purchasing groceries or paying bills, are exempt from CGT.

If, however, you purchased cryptocurrency as an investment, you may be liable for CGT when you dispose of the asset. The good news is if you held the cryptocurrency for 12 months or more, you may be entitled to a CGT discount of up to 50 per cent. In addition, any losses you incur when selling the asset can be offset against any other capital gains you make now or in the future.

3.     Be business savvy

An increasing number of businesses are realising the value of cryptocurrencies by receiving payments and paying suppliers. Cryptocurrency transactions are immutable and non-reversible, eliminating the risks of credit card chargeback fraud for businesses. Transaction fees also tend to be lower and in many cases are quicker, removing reliance on third-parties who can sometimes slow down the process.

If you receive bitcoin for goods or services provided as part of a business, you will need to record this as part of your ordinary income for tax purposes. Where you purchase business items (including trading stock) using bitcoin, you are entitled to a tax deduction based on the ‘arm’s length’ value of the item acquired.

For the 2017-18 financial year, sales and purchases of digital currency are not subject to GST. Therefore you do not need to charge GST on your sales of digital currency and, similarly, you are not entitled to GST credits.

There are also rules in place if you are in the business of mining bitcoin or conducting a bitcoin exchange. Any income derived from these activities should be declared as assessable income but you can also claim related expenses as a tax deduction.

Summary 

Cryptocurrency is becoming a popular way to conduct both personal and business transactions but it is important to know your way around the taxation laws. If you are unsure about any of the rules, visit the ATO website, which has detailed information for cryptocurrency users or get in touch with a qualified accountant.

Asher Tan is chief executive officer and co-founder of CoinJar.

more on this topic

Investment insights

Investor sentiment on Australian commercial property market remains cautious

In the wake of recent Australian government budget announcements, Asian investors are exhibiting a cautious optimism towards the Australian commercial property market. Linda Rudd, CEO of Realside, ...Read more

Investment insights

The hidden concentration risk in Australian portfolios amid mega tech IPOs

Australian investors are facing a significant shift in their international equity exposure, driven by recent changes in major US equity indices. This shift, largely unplanned for by many investors, ...Read more

Investment insights

Private markets see a retail shift as firms adapt to new challenges

Private markets are undergoing a significant transformation as individual investors gain greater access, according to the latest research by State Street Corporation. The Boston-based financial ...Read more

Investment insights

Kevin Warsh signals a return to monetary orthodoxy as new Federal Reserve chair

Kevin Warsh, the newly appointed chair of the Federal Reserve, made a strong impression during his inaugural press conference, signalling a shift towards a more orthodox monetary policy approachRead more

Investment insights

GP-led transactions surge to record $108 billion, reshaping secondary market dynamics

In a remarkable development for the secondary market, GP-led continuation vehicles have emerged as the fastest-growing segment, with transaction volumes hitting an unprecedented $108 billion in 2025Read more

Investment insights

Jurisdictional risk opens door for savvy energy investors

The Australian energy sector is navigating a complex landscape marked by seasonal lows in global demand yet surprisingly high prices. As the sector braces for potential volatility, experts suggest ...Read more

Investment insights

Gold and AUD among Amundi's strategic picks as global risks persist

Amundi, Europe's largest asset manager, has released its latest investment outlook, highlighting a reasonable global growth forecast despite noticeable divergences between the United States and EuropeRead more

Investment insights

RBA's decision to maintain cash rate met with cautious optimism from financial experts

In a move that has drawn a mixed but largely positive response from financial experts, the Reserve Bank of Australia (RBA) announced today that it will hold the cash rate steady. The decision comes ...Read more