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Weird Course > Blog > Cryptocurrency > How to pay your taxes if you’ve made money trading crypto
Cryptocurrency

How to pay your taxes if you’ve made money trading crypto

Alex Hales
Alex Hales Published August 25, 2022
Last updated: 2022/08/25 at 7:16 AM
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Cryptocurrencies have been around for a few years now, and in that time, they’ve caused a lot of confusion regarding taxation. This is mainly because the ATO has not yet released an official statement on how cryptocurrencies should be taxed. However, the ATO has recently announced that they will release such a statement soon. In the meantime, here are some things taxpayers should know about the current tax treatment of cryptocurrencies.

What are cryptocurrencies, and how do they work?

Cryptocurrencies are digital currencies that use cryptography for security. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.

Cryptocurrencies work by using a technology called the blockchain. Blockchain is a distributed database that records all transactions made with cryptocurrencies. This means that every transaction is publicly visible, and it is impossible to tamper with the blockchain ledger. This makes cryptocurrencies very secure and trustworthy.

How are cryptocurrencies taxed in Australia?

The ATO has not released an official statement on how Australia should tax cryptocurrencies. However, some things taxpayers can assume about the current tax treatment of cryptocurrencies.

One assumption is that cryptocurrencies are treated as capital gains assets. Any profits made from trading or holding cryptocurrencies will be taxable. In addition, any expenses incurred while trading or holding cryptocurrencies (such as internet fees and electricity costs) can also be claimed as tax deductions.

What changes might be coming soon?

The ATO has recently announced that they will release an official statement on the tax treatment of cryptocurrencies shortly. This statement will likely clarify how cryptocurrencies should be taxed in Australia. The ATO may decide to treat cryptocurrencies as a currency or as property. If they treat them as currency, profits from trading or holding them will not be taxable. If they decide to treat them as property, then profits from trading or holding them will be taxable, but expenses incurred while trading or holding them will not be deductible.

What do I need to do if I have made money from trading cryptocurrencies?

You must include this in your tax return if you have made money from trading cryptocurrencies. You will need to calculate your capital gains or losses, and you may be able to claim deductions for any expenses you incurred while trading. Be sure to keep records of all your trades and costs, as the ATO may ask for these at a later date.

What if I don’t pay my taxes on cryptocurrency profits?

You may be subject to interest and penalties if you don’t pay your taxes on cryptocurrency profits. In addition, the ATO may take action to recover unpaid taxes, such as garnishing your wages or freezing your bank account. So, you must pay your taxes on time and in full.

The ATO’s clarification on the tax treatment of cryptocurrencies is welcomed news for taxpayers. It will provide much-needed clarity on properly reporting and paying taxes on cryptocurrency profits. In the meantime, be sure to keep records of all your trades and expenses, as the ATO may ask for these at a later date. If you feel overwhelmed, it would be best to talk to a specialized crypto taxes tax accountant who can help you stay compliant. With this help, you can be sure that you’re paying the right amount of taxes on your cryptocurrency profits. A little bit of help now can save you a lot of headaches down the road.

This article provides an overview of how cryptocurrencies are taxed in Australia. It should not be taken as legal or financial advice. Always speak to a qualified professional about your specific circumstances before making any decisions.

Alex Hales August 25, 2022
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