Are Cryptocurrencies subject to tax? It depends on what happens.
Recently, the cryptocurrency has been discussed in Australia with the ATO implementing new measures to get cryptocurrency users to pay tax. This subject matter had raised many bags of dust, with people suggesting this deal won’t make it through. But it is clear now that you will be taxed for using your cryptocurrency. This article will discuss how you can handle these taxes.
Why are cryptocurrencies subject to tax?
For the Australian Tax Office (ATO), bitcoin and other forms of cryptocurrencies are not money, foreign, or Australian currency. Instead, cryptocurrencies are classified as property and an asset, which qualifies as taxable under capital gains tax. The everyday use of your bitcoin does not carry a tax obligation. However, your cryptocurrency is taxable when:
- You sell or gift your cryptocurrency
- Trade or exchange cryptocurrency for fiat currency or another cryptocurrency
- Convert your cryptocurrency to a fiat currency
- use your cryptocurrency to obtain goods and services, and so on.
Is your cryptocurrency taxable in the event of a hard fork?
In the event of a coin split or a hard fork, as it happened with the release of Bitcoin cash in August 2017, the tax liability imposed is of two kinds, namely:
- When cryptocurrency is held as an investment: in the event where you hold a coin as an investment, and there’s a hard fork or coin split, the ATO will only charge you capital gains when you chose to dispose of the new coins.
- Cryptocurrency held in business: when the cryptocurrency is contained in the industry, it is seen as trading stock; capital gains are charged on the coins when it is put out for sale.
Is a cryptocurrency trader taxable for his trades?
The ATO is specific on the tax liability of a cryptocurrency trader. The trader is taxable for capital gains as to the profits made from the trade; the trader can also deduct his losses.
Cryptocurrency tax exemptions
The following are tax exemptions that are available to cryptocurrency users in Australia.
- When cryptocurrency is used to make a purchase for goods and services for personal use
- When cryptocurrency is held for more than 12 months; the holder is eligible for a 50% capital gain tax.
