It’s Virna White, CEO and Managing Director of Wealth Safe. On February 26, 2022 I joined the Global Wealth Club to speak at their crypto taxes and asset protection online event. Here, I answered the 12 most frequently asked questions I receive from clients on tax for cryptocurrency in Australia.
I’ve written the transcription below to answer all the burning questions you need to know about the crypto tax laws so you can protect your assets and keep more wealth in your pocket:
Cryptos have the same tax laws as every other asset class. Therefore, there are no special laws on tax for cryptocurrency in Australia.
However, there are three (3) points to note:
1. The FIRST is the challenge in record keeping. This was discussed by the accountant, Michaela Rankin in her crypto taxes presentation.
2. The SECOND is tracking your transactions, i.e. gains and losses, as monies come in and out.
The benefit of tracking your coins accurately is firstly, it ensures you don’t donate extra tax you don’t have to and secondly, you’re able to easily identify which coins are eligible for the 50% CGT discount.
Therefore, it’s wise to diligently keep track of your records by having a system in place such as using cointracking, Koinly or a similar software. An excel spreadsheet too could work but may get challenging if you’re in DeFi projects, yield farming, liquidity mining, staking, bot / grid trading or such.
3. The THIRD point to understand is the Australian Tax Office (ATO) don’t view crypto as money. Rather, they view it as “property” and therefore is a capital gains tax asset for tax purposes.
Oftentimes clients will ask me, “what’s the rate for CGT once the 50% discount is applied?”
There is NO specific tax rate for capital gains. The capital gains get added to your other sources of assessable income & taxed at your individual rate.
The ATO talks a lot about your intention.
Understanding whether you’re an Investor or Trader is critical in relation to compliance purposes and tax for cryptocurrency in Australia.
The short answer to this question is if you’re buying & selling coins regularly, you’re likely to be considered a Trader by the ATO.
On the other hand, if you’re buying & holding for periods of time, and only sell from time to time at a profit, you’re likely to be considered an Investor by the ATO, and CGT will apply.
Therefore, we recommend you keep accurate records if you sell a crypto coin at a profit.
It is absolutely CRITICAL. Here’s why…
Once you’ve derived gains in cryptocurrencies, it’s too late to do much about it, especially if you haven’t organised to buy your crypto coins in a structure.
For example, if you buy $10k BTC and it goes to $50k, you’ve made the profit. You pay ALL the tax in your own name. (Remember, individuals get taxed at the highest margin rate).
Therefore, it’s crucial to set it up properly from the very beginning to make sure you keep more of your profits in your pocket.
You can book a free 30-minute call to speak with one of our experts and discuss your options on the best tax structure for you, plus find out how much tax we can save you in cryptocurrencies.
Yes, it is still possible to move your cryptocurrencies into a structure. However, tax will be paid on the transfer.
The best thing to do if you’re in this position is to speak with an expert who can go through your cryptos, work out how much tax you will pay, and tell you which ones to move into a structure and which to keep in your own name for now.
Unfortunately, as a general rule, there isn’t a lot we can do if you’ve already derived the gain. However, there are sometimes things we can do.
This is why it’s important to set it up right in the first place rather than leave it until it becomes a BIG problem.
What I tell my clients is if you anticipate large profits, it’s often best to “wear” some tax, get it set up right, and know in future, you will pay a lot less.
Yes, you do.
The ATO says if you turn BTC into an alt coin or cash it into fiat, you’ll pay tax on any gain.
This is why once again it’s important to always keep clear and accurate records. Tracking your tax for cryptocurrency in Australia can be cumbersome but certainly worthwhile.
One way is to open up an exchange account in the name of a trust / structure.
This is, however, difficult to do in practice. Plus, with a Trezor or Ledger wallet, it is physically held.
We recommend people use a mixture of a service agreement and trust minute to correctly link the cryptos with the trust / structure.
This is something Wealth Safe can assist you with.
Yes, you do.
The ATO state you must keep records of all transactions and the onus is on you to ensure they’re accurate.
That is, within crypto exchanges as well as bank account statements.
The tax office regard all transactions as taxable in Australia with only a few exceptions.
This is an important component to understand if you’re setting up a structure - for the purpose of tax for cryptocurrency in Australia.
Crypto service agreements or bare trusts are legal agreements which state although you have the cryptos held in your own name, they’re effectively held on behalf of your structure.
The minute gives effect to this by the trust stating that all cryptos are held in your name on its behalf (as the trust is a separate entity to the individual).
This ensures if the ATO ever looks at it down the track, the cryptos belong to the structure, not the individual.
You can read our “Introduction to Trusts” here.
Although in theory it’s possible … in practice it’s extremely difficult to do so.
Binance, for example, make it near impossible to open an account in the name of a trust due to the KYC requirements. However, CoinSpot will let you set it up in the name of the trust.
This is why we prefer the crypto service agreement / bare trust along with the trust minute.
Yes, most certainly.
Banks seem to think cryptos are a money laundering tool and refuse as soon as they get any inkling cryptos are involved.
This is where the bare trust / minutes are useful.
That is, because you can open the bank account in the name of the trust but make no mention of the cryptos as technically, they’re held in your own name.
1. Make sure you’re structured correctly from the beginning. Don’t delay on this.
2. Engage an accountant who specialises in cryptos.
3. When transferring / sending money between wallets always do a small $$ test amount first.
4. It’s a very volatile market so make sure you understand what you’re doing, and the risks involved.
5. Watch out for security, phishing scams, etc.
6. SECURITY is the number ONE priority
Make sure you watch the full Q&A as I answered 20+ more burning questions on tax for cryptocurrency in Australia.
If you’re ready to start slashing your crypto taxes, book a call with our expert team who can guide you with any questions you have on cryptocurrencies, asset protection and tax structures.