The transaction and use of cryptocurrency in Australia are evolving rapidly. If you’ve bought, sold or even traded using cryptocurrency, you have a tax obligation to retain records. Here are a few essential tax tips that you need to consider if you have made a profit by trading in cryptocurrency:
1. Sort out Tax Liabilities
Sorting out the liabilities makes it easy to strategise your taxes for the rest of the financial year.
Let’s share an instance here: If you have made a profit with Bitcoin and soon planning to sell some coins that you are sure would cause a loss, then it is better to sell them before 30th June. Doing so will ensure the loss gets offset against the gain in the current year.
However, if you wait until July to sell, the loss will be considered as an offset against the profits in the next tax year.
2. Know the Taxable Events
Most people have little idea about taxable events, especially when it comes to cryptocurrency. When you are trading in cryptocurrencies, make a note that these transactions are considered taxable events. The Australian Taxation Office considers cryptocurrencies to be assets. Therefore, they consider crypto to crypto trade as taxable and you are obligated to pay tax if you have made a profit by selling cryptocurrency.
3. Figure Out Your Status
Are you in the business of trading the cryptocurrency or are you just an investor? Your status as a cryptocurrency holder might affect the taxes on your gains. For example: Cryptocurrency traders have to pay their taxes on all income. However, investors can access the capital gains tax discount if they hold a coin for more than a year.
4. Keep your Records Up-to-date
You can keep track of your transactions by using various software like cointracking.info. Remember that the ATO requires evidence to substantiate transactions so you should always keep your records up to date.