Cryptocurrency Investing & Trading

So, you have some crypto, maybe done a few trades, maybe spent it to buy a lambo:

What are the tax consequences?

First off the rank… crypto to crypto trades are taxing events

We’re sorry to be the bearer of bad news, but every time you exchange one cryptocurrency for another, you’re triggering a taxing event. So, next time you’re exchanging say BTC to ETH, you’ll know the ATO might want its cut.

They do say the only two things guaranteed in life are death and taxes. Our advice:

Seek tax planning assistance at the beginning to minimise tax at the end.

Hodlers vs Traders

Hodlers, aka Investors, are taxed differently to traders, so it’s important to work out where you sit. You might have a foot in both camps.

Hodlers

A hodler is someone who has purchased cryptocurrency as a long term investment.

They’ve bought cryptocurrency with the intention of owning it for a long time – usually years.

They typically have a dual motive of wanting to make a profit from price appreciation (of course!) but are also interested in the underlying blockchain tech and want to see it change the world by providing a product which has never existed before, or simply done much better by use of the blockchain (cut out the middleman).

If you’re a hodler, then broadly speaking this is how you’re taxed:

• Gain made on crypto sale that was owned for less than a year – 100% tax assessable.
• Loss made on crypto sale – is not an outright tax deduction, but will offset gains made on other long term assets (whether in the same year or future years).
• Gain made on crypto sale that was owned for more than a year – 50% tax assessable, 50% tax-free (winning!).

For a more detailed explanation see: What are Australian tax issues for cryptocurrency investors?

Traders

A trader is someone who is trading in and out of cryptocurrency seeking to make a profit from short-term price movements.

This includes those taking advantage of price arbitrage across exchanges; those utilizing technical analysis – day/swing traders; bot traders; those flipping crypto on pump and dumps; etc.

If you’re a trader, then broadly speaking this is how you’re taxed:

• Profit – 100% tax assessable.
• Loss – 100% tax deductible (subject to passing non commercial loss rules).
• You may also have GST compliance obligations.

For a more detailed explanation see: What are Australian tax issues for cryptocurrency traders?