ATO introduces updates to Cryptocurrency tax treatment

Cryptocurrency is a digital currency designed to work as a medium of exchange. In technical terms, it uses cryptography to secure and verify transactions, as well as to control the creation of new units of a particular cryptocurrency.

While there have been many attempts at creating a digital currency since the mid-1990s technology boom, it was the emergence of BitCoin in late 2009 that saw cryptocurrency become mainstream. Who can forget Christmas 2017 where BitCoin’s bubble hit all-time, its shares trading as high as US$11,000!

It’s not surprising then that cryptocurrency soon caught the attention of mum and dad investors, and thus resulted in Government tax agencies introducing updated policies and procedures specifically for online trade currency.

Recently, the Australian Tax Office (ATO) updated its guidance on the tax treatment of cryptocurrency, including practical issues associated with exchanging one cryptocurrency for another and record keeping requirements.

A common area of confusion for those involved in cryptocurrency transactions is whether a taxing event is triggered if one cryptocurrency is exchanged for another cryptocurrency.

However, the ATO has confirmed an exchange DOES trigger a taxing agent. Therefore, the market value of each item needs to be taken into account in determining whether a taxable gain or loss arises, as well as determining the tax cost base of the new item.

For record keeping purposes, the ATO also expects taxpayers to keep the details of cryptocurrency transactions, including dates, values, what the transaction was for, and other general data.

While cryptocurrency can be a confusing topic, thankfully AMD is here to help.

Feel free to contact our Tax Services team to discuss the latest cryptocurrency tax updates and how they may affect you.