People who convert cryptocurrency to Australian dollars or other money may be liable to pay capital gains tax, according to new tax guidance issued in July.
The Australian Taxation Office updated the information on its website dealing with tax and cryptocurrency. It says a CGT event occurs when a person disposes of their cryptocurrency.
A disposal occurs when someone:
- sells or gifts cryptocurrency;
- trades or exchanges cryptocurrency, including the disposal of one cryptocurrency for another;
- converts cryptocurrency to fiat currency, such as Australian dollars; or
- uses cryptocurrency to obtain goods or services.
The ATO says that if the disposal results in a capital gain, some or all of the gain may be taxed.
If the disposal is part of a business, profits on disposal will be assessable as ordinary income and not a capital gain.
While a digital wallet may contain different types of cryptocurrencies, each cryptocurrency is a separate CGT asset.
However, capital gains or losses will be disregarded if the cryptocurrency is a personal use asset. Personal use assets are defined as CGT assets that are “used or kept mainly for personal use or enjoyment.”
Any personal use asset acquitted for less than $10,000 is disregarded for CGT purposes.