Accounting for cryptocurrency transactions for tax purposes

Cryptocurrency is a digital asset in which encryption techniques regulate the generation of units and verify transactions on a blockchain. Cryptocurrencies are usually independent of central authorities or banks.

If you exchanged cryptocurrency for goods, cash or other cryptocurrencies during the financial year, it is considered disposal for the purposes of capital gains tax, and you should include a capital gain or loss in your income tax return.

3 cryptocurrency tax tips

1. Disposal – Report disposal of cryptocurrency for capital gains if you:
   1. Exchange one cryptocurrency for another,
   2. trade, sell or git cryptocurrency,
   3. convert cryptocurrency to flat currencies e.g., Australian dollars.
2. CGT – Calculating CGT on cryptocurrency:
   1. A capital gain or loss is your proceeds (the market value in AUD at the time of disposal/sale) minus what you paid (the market value in AUD at the time of purchase).
3. Records – You must keep records of every cryptocurrency transaction including buying, owning, and selling for tax purposes.

Read the Australian Tax Offices tax smart tips for your cryptocurrency investment.