Is cryptocurrency transfer taxed in Australia?
This article explores the tax implications of cryptocurrency transfers for Australian investors, including gifting cryptocurrency, if transfer fees are deductible, and how they are compliant with crypto taxes.
Let’s find out.
Are cryptocurrency transfers taxed?
Transfer of cryptocurrency between personally owned wallets or exchange accounts is not subject to tax in Australia. As a result, you can send your crypto from one exchange to another, from a hot wallet to a cold wallet (for example, Trezor), or from one Blockchain address to another without it being considered a disposition, and thus a taxable event.
However, if you transfer cryptocurrency from a wallet you control to another wallet that belongs to a different person, the ATO will consider it to be getting rid of it. In Australia, any disposal of cryptocurrency by an investor is a taxable event and subject to capital gains tax.
Cryptocurrencies that are given away as gifts have the same treatment as any other cryptocurrency disposal. The party giving the cryptocurrency is taxed as if they were selling their cryptocurrency, while the receiving party acquires a new CGT asset with a cost base of AUD 0.
Let’s look at the processing of transfer fees after clarifying that a cryptocurrency transfer is only taxable if it is also eliminated.
Are currency conversion fees tax deductible?
The fees associated with transferring cryptocurrency can be an expense in acquiring or disposing of the asset. The cost base of the asset will calculate the fee amount based on its fair market value at the time of the transfer.
Do you have to pay taxes on crypto transactions?
It is important to distinguish between cryptocurrency transactions and cryptocurrency transfers. Cryptocurrency transactions occur when you convert any digital asset to FIAT (eg, AUD), to another cryptocurrency, or give away cryptocurrency (eg gifts). These are all taxable events in Australia.
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Cryptocurrency transfers occur when you send crypto from one personal wallet to another or from one exchange account to another. These operations are not taxable events in Australia. Crypto transactions are different from cryptocurrency transfers and are therefore taxable. On the other hand, transfers of cryptocurrencies between personal wallets are not taxed in Australia.
Do you pay taxes when buying cryptocurrency?
No. Purchasing cryptocurrencies with FIATs (for example, Australian dollars) is not a taxable event, and therefore non-taxable. However, the fees associated with the purchase of cryptocurrency can be added to the cost base of that asset, reducing capital gains. Moreover, holding cryptocurrencies without selling a portion of them is not a taxable event.
However, if you sell or gift any part of your cryptocurrency, you will have a taxable event in Australia.
Let’s look at this in more detail with a realistic scenario on how to tax transfers of cryptocurrencies between wallets.
Is there a tax on transferring cryptocurrency to a wallet? Real life example.
Let’s imagine that Mary bought 1 Bitcoin at A$30,000 in December 2020.
In January 2021, Mary sent 0.5 BTC from her Binance wallet to the recently purchased Trezor cold wallet.
Mary paid a transfer fee of 0.001 BTC at the time. In January 2021, 1 bitcoin was 40 thousand Australian dollars. As a result, Mary paid A$40 to convert her cryptocurrency, and her bitcoin cost base is now A$30,040.
Maries crypto transfer is not a taxable event in Australia. However, it can add transfer fees to the asset’s cost base and lower its taxes when it is sold.
Is sending someone bitcoin taxable?
Let’s imagine that Mary (from the previous example) wants to send some of her bitcoins to a friend. In March 2021, Mary sent 0.1 BTC from her Binance account to her boyfriend’s address. The bitcoin price was A$50,000 at the time, and the transfer fee was 0.001 BTC.
Gifting cryptocurrency is taxable in Australia. As a result, the gift of 0.1 BTC is the disposal of cryptocurrency, which leads to capital gains tax. The sales revenue was A$5,000 (0.1 BTC * A$50,000), with a fee of $50 (0.001 BTC * A$50,000), which can be deducted from the proceeds, resulting in $4,950 in revenue. The cost base is $3,004 AUD (0.1 BTC * $3,004 AUD because the adjusted cost base is $3,040 to include transfer fees).
As a result, Mary received a capital gain of A$1,946, which she would have to report and pay the appropriate capital gains taxes on. Since she has held less than 12 months, she will not get any tax benefits on the capital gains rate.
How can I reduce capital gains tax in Australia?
You can reduce your crypto tax bill in Australia by holding your cryptocurrency for more than 12 months, which effectively reduces your capital gains tax by 50% when you end up selling your cryptocurrency.
Long-term tenure can have tax advantages across countries, lowering the effective tax rate, including Australia. Finally, you can consider the top 5 tax free crypto countries to where you can consider relocating.
Is transferring cryptocurrency from one wallet to another taxable? The last word
No, moving cryptocurrency from one wallet to another is not a taxable event in Australia.
However, trading FIAT/crypto cryptocurrencies or crypto gifts are taxable events in Australia, and are subject to capital gains taxes.
How can cryptocurrency taxes be tracked?
There are requirements for crypto tax reporting when trading cryptocurrencies in Australia.
You should keep updated records of your crypto trades, including the amount sold, the price at which you sold the coins, the profit/loss of each trade, and the date of the transaction.
For tax purposes, you should keep your crypto trades up to date during the year to facilitate your tax season. Fortunately, CoinTracking can help you manage all your crypto reports in just a few simple steps.
How is crypto taxed in Australia?
You can do your own coding in Australia in 3 steps:
Import your crypto trades, including DeFi and NFTs, into CoinTracking.
Get your automatically calculated earnings based on ATO approved accounting methods.
Create fully compliant, ready-to-use tax reports for inclusion on your tax return.
Australian Crypto Tax Calculator: CoinTracking
CoinTracking is the best crypto tax software for Australian investors, allowing trades to be imported from hundreds of exchanges, including DeFi/DEXes, Binance Smart Chain, MATIC, NFTs and more!
CoinTracking can then help you take care of all your crypto tax reporting requirements:
Over 25 advanced reports, including coins that offer you a tax-free rate.
Automatic capital gains through 12 accounting methods (eg, FIFO, LIFO, HMRC, ACB).
Create complete tax reports.
Learn how CoinTracking automatically calculates your crypto earnings:
Do you have any questions about crypto taxes? Check out Full Service Australia
CoinTracking also offers a full service for Australian traders. A CoinTracking expert from Cryptocate, a leading Australian crypto tax company, will review your account, fix any errors and ensure your tax returns are submitted flawlessly.
Check out our other crypto guides for Australian traders:
Cryptocurrency Australia Tax: The Complete Guide
NFT Taxes Australia: The Complete Guide
Australian Taxation and Cryptography Bureau
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*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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