Do I pay taxes if I buy something with crypto in Australia?

When crypto becomes mainstream, you may want to start spending it on your daily life for products or services, but these transactions taxable in australia?

This week, we cover the difference between using crypto as an asset for personal use versus using it as an investment and how that affects your taxes.

Stay tuned to clear your crypto tax doubts with CPA Professional Insights for Australia’s cryptocurrency, Cryptocate.

Is buying something with cryptocurrency a taxable event in Australia?

Purchasing a product or service using crypto is a taxable event if you purchase cryptocurrency as an investment rather than as an asset for personal use. So, what’s the difference?

Let’s imagine that you bought Bitcoin as an investment last year. Now, Bitcoin is worth more, and you haven’t sold it. In the meantime, you want to use some of your Bitcoin investment to buy a new computer.

Two days later, you buy the computer directly with some of that bitcoin. In this case, this transaction is a taxable event, subject to capital gains taxes because you have Bitcoin as an investment, and you buy it with the intention of spending it right away.

Capital Gains Tax Cryptocurrency Australia

If you invest in and dispose of cryptocurrency (including spending it to purchase a product), you create a taxable event in Australia, subject to capital gains taxes.

The capital gain will be the difference between the sales proceeds (when you sell your investment) and the cost base (the fair market value of the cryptocurrencies you purchased at the time of acquisition).

The capital gains tax rate in Australia depends on the total level of taxable income for that year, depending on other factors (eg holding period, deductions, etc.).

Can cryptocurrency spending on a product not be subject to capital gains taxes? Let’s cover how it might fit into a personal asset usage scenario.

Is spending cryptocurrency as an asset for personal use taxed in Australia?

No, but you need to confirm that the cryptocurrency you are using is intended for the purchase of goods (“personal consumption”) and not as an investment.

The Australian Tax Office (ATO) defines cryptocurrency as an asset for personal use “if it is held or used primarily to purchase items for personal use or consumption.”

So, what ranks the origin of personal use? If you buy any cryptocurrency with the specific intent of using it for purchases, or you buy it, and in a short period of time, you use it to purchase goods in a consistent manner (a large part of your holdings), then it can be considered an asset for personal use.

The main difference is the time you held your initial cryptocurrency purchase. If you buy it and keep it for the long term, the likelihood that it will be an investment rather than an asset for consumption is higher.

ATO makes a final note about capital gains for personal use assets:

“Capital gains you derive from personal use assets acquired for less than $10,000 for CGT purposes are ignored.”

Do you have to pay tax on cryptocurrency in Australia?

Any disposal of cryptocurrency in Australia is a taxable event. These include cryptocurrency trades (for example, the Australian dollar), crypto to cryptocurrency trades, NFT trades, and even crypto gifting. Cryptocurrency trading or NFTs are taxable events that are subject to capital gains taxes. Learn more about cryptocurrency taxes in Australia.

However, receiving cryptocurrency airdrops, receiving crypto benefits, receiving crypto staking rewards, or receiving your paycheck in cryptocurrency are taxable events that are subject to income taxes rather than capital gains taxes.

You will not be subject to taxes when you do not dispose of your crypto investment. For example, transferring your crypto between wallets or simply buying and holding any cryptocurrency without selling any part of it.

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Do you have any questions about crypto taxes? Check out Full Service Australia

Cryptocate, CoinTracking’s full-service Australian partner and leading Australian crypto tax firm, offers a range of services to help with cryptocurrency reporting. If you need help reporting airdrops or any other crypto income, Cryptocate specializes in generating cryptocurrency income and capital gains reports to ensure tax compliance. Talk to an expert from Cryptocate today by submitting a form on our full service page!

Clarify your questions about crypto taxes in Australia:

  1. Cryptocurrency Australia Tax: The Complete Guide

  2. Do you pay taxes on bitcoin salary in australia?

  3. NFT Taxes Australia: The Complete Guide

  4. Do you pay taxes to transfer cryptocurrency in Australia?

  5. Australian Taxation and Cryptography Bureau

  6. Do you pay taxes for receiving airdrops in Australia?

  7. Find crypto tax accountants near me

  8. The 85 Best Crypto Twitter Accounts To Follow

  9. Top 12 Markets for NFT

  10. Crypto Debit Cards: Top 5 Suppliers in 2021

  11. Bitcoin Analysis: Here are the 7 Best Tools to Find It

  12. Non-Foldable Tokens: A Beginner’s Guide to 2021

*This post is part of our education series on Crypto Taxes in Australia, backed and reviewed by expert accountants from Cryptocate, Australia’s full service CT provider.

Disclaimer: All information provided above is for informational purposes only and should not be considered professional, legal or tax advice. You should do your own research or consult with a professional financial advisor when investing.

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