Crypto Assets – What are they and what is the Tax Effect?
Crypto assets are a digital representation of value that you can transfer, store or trade electronically.
Crypto generally operates independently of a central bank, authority or government. Transactions are subject to the same tax rules as assets in general and depend on how you acquire, hold and dispose of the asset.
For tax purposes, crypto assets are not a form of money. There are different types of crypto assets in the marketplace and each asset has to be treated separately for tax purposes. The crypto currency Bitcoin is a popular form of crypto asset used for investment purposes and are taxed as CGT assets when a transaction involving a disposal takes place such as:
- Selling or gifting the crypto asset
- Trading, exchanging or swapping a crypto asset for another crypto asset
If the crypto asset is acquired or sold in a foreign currency, the value of that asset must be converted to Australian dollars in order to determine any capital gain or loss resulting from the CGT event.
Therefore, keeping good records of your crypto assets is essential for meeting your tax obligations and should include:
- Receipts when you buy, transfer or dispose of crypto assets and the date of each transaction
- A record of what the transaction is for and who the other party is
- Exchange records
- A record of the value of the crypto asset in Australian dollars
- Digital wallet records and keys
- Records of agent, accountant and legal costs; also, software costs that relate to managing your tax affairs
The records are to be kept for 5 years, must be in English and in writing – either electronic or paper.