As of 2022, more than 1 million Aussies now own some cryptocurrency. 

And while crypto is going through a long winter right now, there are still some people who have made big gains. And when you’ve made big gains, the tax man and woman is juuuuuust around the corner. 

So if you’ve bought crypto with the intention of making a profit through a big juicy crypto sale - then it’s likely you’ll need to pay capital gains tax on it.

Yup, you read that right! A capital gains tax (CGT) ‘event’ occurs when you dispose of your cryptocurrency. That’s a fancy way of saying when you:

• Sell or gift your crypto
• Trade or exchange it 
• Convert it into AUD
• Use it to buy goods or services.

So, come tax time, the Australian Taxation Office (ATO) will wanna know all about your crypto transactions.

So how do I work out CGT for crypto?

Cryptocurrency is generally treated like any other asset (i.e. shares or property). That means to work out your capital gain or loss, you’ll need to:

• Work out the value of your crypto in Aussie dollars at the time of the purchase + brokerage fees (i.e. your ‘‘cost base’)
• Work out what you received when you disposed of it in Aussie dollars (i.e. your capital proceeds).

The formula then is:

• Capital proceeds - cost base = capital gain (or loss).

So let’s say you purchased 1 bitcoin for $10,000 (+$20 in brokerage fees) in March 2020 and then you sold it 12 months later for $78,200. The formula would be:

• $78,200 - $10,020 = $68,180 (capital gain).

If you’ve made a capital gain, you’ll need to report it in your tax return. If you’ve made a capital loss, you can use it to reduce a capital gain you make in a later year.

The capital gains will form part of the tax paid on your assessable income.

Do I need to keep records?

A big, fat YES to this.

You’ll need to keep records for all your crypto transactions. That’s any record of buying, holding or disposing of your crypto. And, you need to keep records for five whole years after you dispose of your crypto.

Records mean any documents that show:

• The type of crypto you bought or sold
• The purchase or sale price (in AUD)
• The date and time of the transaction
• What the transaction for.

You’ll also need records of:

• Any fees charges for the purchase
• Any exchange records
• A calculation of your capital gain or loss.

All information contained in the Flux app is for education and entertainment purposes only. It is not intended as a substitute for professional financial, legal or tax advice. While we do our best to provide accurate information on the podcast, we accept no responsibility for any inaccuracies that may be communicated.