(STL.News) In 2009, the Bitcoin network was launched to create a decentralized, peer-to-peer digital money based on the solution of cryptographic problems by computers.
Today, people all around the globe routinely trade Bitcoin and many other cryptocurrencies like Ethereum, Litecoin, Ripple, and even “joke coins” like Dogecoin. Australia, or the Commonwealth of Australia as it’s formally known, is a sovereign nation that includes the mainland of Australia, the island of Tasmania, and some other islands. More than 800,000 Australian taxpayers will have sold digital assets, such as bitcoin, by the end of 2021. To calculate crypto tax, you must determine whether you earned a profit or a loss on each sell or swap transaction involving the cryptocurrency you chose.
What Are Cryptocurrencies?
Coins used in the cryptocurrency market are digital tokens. They are a kind of virtual money that facilitates online peer-to-peer transactions. Digital currencies are only worth as much as buyers are prepared to pay for them on the market since their value is not based on any laws or underlying resources. In contrast, the legal tender status of a national currency contributes to its value. Bitcoin and Ether are only two of several cryptocurrencies available today.
There has been a dramatic uptick in bitcoin market activity. The interest in these currencies has been driven more by speculation (buying cryptocurrencies to make a profit) than by their practical use as a novel payment method. Coincidentally, this has contributed to significant price swings in cryptocurrencies.
Is Cryptocurrency Taxed In Australia?
Financial gains or losses on coins are subject to taxation. The Australian Transaction Reports and Analysis Centre requires all cryptocurrency exchanges to register as financial service providers (AUSTRAC).
You are legally obligated to report any purchases, sales, gifts, trades, exchanges for altcoins, and conversions of cryptocurrency to fiat money and any financial gains or losses you may have incurred as part of your annual tax return.
To calculate capital gain or loss, one must compare the initial investment with the sale price. Remember that applicable transaction fees must be included in the overall price. When it comes to paying taxes, holding bitcoin for more than a year will get you a 50% reduction in the CGT.
Calculating Taxes On Crypto
When ascertaining crypto tax liability, many Australian taxpayers encounter problems. Despite the widespread belief that cryptocurrencies are money, the government classifies them as property rather than currency. For this reason, it might be challenging to ascertain how much tax you must pay on your digital assets.
Australia ranked 6th among all countries. When it comes to economic freedom and competitiveness, Australia ranks quite well. Goods and services are priced in Australian dollars across the country. While some stores may accept cryptocurrency as payment, it is only sometimes utilized as a standard unit of price comparison. The ATO still suggests keeping track of all cryptocurrency purchases to calculate crypto tax. Keep records of acquisitions, including the cryptocurrency used, the amount paid in fiat money, and the date. Any cryptocurrency transactions you conducted this year that did not include a sale or exchange will not affect your taxable income.
Another way to get rid of cryptocurrencies is to give them away as a gift. If you give away cryptocurrency, you must tell the ATO since they tax every transaction. As long as you keep possession of the cryptocurrency, the ATO states that you are not required to declare the transfer as a disposal. You are required to disclose any sales of cryptocurrencies on your tax return. Capital gains tax (CGT) is computed by subtracting the buying price from the selling price.
Businesses nowadays are becoming receptive to cryptocurrencies as a means of payment. You may file your tax return without help if you’ve done your homework and are sure you’ve taken advantage of all possible exemptions, deductions, and disclosures.