Cryptocurrency is currently legal in Australia. In a 2013 interview the governor of the Reserve Bank of Australia (RBA) stated “There would be nothing to stop people in this country deciding to transact in some other currency in a shop if they wanted to. There’s no law against that, so we do have competing currencies.”
Crypto can be used for personal or business transactions in Australia. You can use it to buy your morning coffee or even to buy a house.
However, just because you want to pay with bitcoin, there is a possibility a business might not want to accept it. Businesses have the choice to choose whether or not they accept crypto as a payment or not.
For tax purposes, crypto is treated as property like a house or car. This means it is subject to Capital Gains Tax. The ATO has noted that if you’re using bitcoin for day-to-day transactions rather than as an investment, Capital Gains Tax doesn’t apply.
The way Capital Gains Tax (CGT) is calculated is based on the difference between the amount you paid for the cryptocurrency and the amount you disposed of in order to obtain it. Any profit you make is subjected to CGT, but this can be potentially reduced by 50 percent if you hold the cryptocurrency for over 12 months.
If you are a business owner who has received cryptocurrency for your goods or services, you will need to record the value of the cryptocurrency units in Australian dollars as a requirement when reporting your ordinary income for tax purposes.
Cryptos exchanges are regulated in Australia to make sure consumers are protected and that cryptocurrency isn’t used to contact illegal activities.
In 2018, the Australian Transaction Reports and Analysis Centre (AUSTRAC) began regulating Australian cryptocurrency exchanges. This ensured that cryptocurrency exchanges complied with Australia’s strict Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) laws. Exchanges are required to register as an exchange, identify and verify users, and to make sure you keep your financial records.
To make things easier come tax time, the ATO and tax professionals strongly recommend that you keep the following records for all of your cryptocurrency transactions:
- Transaction date
- Transaction value in $A
- Description of the transaction
- Receipt of the purchase or sale transaction
All of the above information will ensure you keep adequate records for the ATO.
It is important to realise that the ATO has extremely sophisticated and ever-improving data-matching technologies. This means ATO staff can likely access and track your exchange records to determine your trading history.
If you fail to report all of your transactions to the ATO, it is highly likely that it will find out. It may not find out immediately after you lodge your tax return, but rather several years down the track. This can result in significant fines and penalties.
Cryptocurrency Related Scams Are Costing Australians More Than $100 Million
The Australian Federal Police (AFP) has revealed that cryptocurrency related scams have increased significantly during the covid-19 pandemic. Recently released figures from the Australian consumer watchdog shows that there was an increase of 172 percent in losses between January and November 2021. This added up to a total of $109 million.
“Criminals are really quick to exploit a crisis. We’re also seeing more and more people working from home which presents greater opportunities for criminals to target people,” said Australian Federal Police Cybercrime Commander Chris Goldsmid.
The Australian Competition and Consumer Commission (ACCC) believes that the losses to cryptocurrency-related scams were most likely to be much higher than the $109 million it has recorded so far this year. One of the reasons why it is predicted to be much higher is because according to the ACCC many victims are too distressed or embarrassed to report their experiences.
The AFP says that for many Australians victims are usually lured in by advertisements on social media, filling out their details and unwittingly becoming an easy target.