Tax Talk – Bitcoin and your tax return


Bitcoin and the ATO

With talk of Bitcoin leading the headlines throughout this year, as with anything concerning money, the attention of the ATO was caught.

Consequently, the ATO has put together some points about how they will view any income earned from trading in Bitcoins.

So where does this leave Bitcoin Bob when it comes to preparing his tax return this year?


Taxable Income or Capital Gain, that is the question

From the ATO’s perspective, the trading of Bitcoins is similar to that of shares.

For individuals, the ATO views cryptocurrency as property and as an asset for capital gains tax (CGT) purposes. When ever you sell, trade or exchange a Cryptocurrency this is a CGT event.


For those carrying on a business, funds or property you receive from a disposable of bitcoins may be considered as ordinary assessable income and you may be able to claim deductions.

Proceeds from the sale of cryptocurrencies held as trading stock are ordinary income.



The Good News for Bitcoin Bob

With cryptocurrency coming under Capital Gains Legislation, individual bitcoin sellers are entitled to a 50% discount on gains where the bitcoins were held for more than 12 months. This is the same concession available to sellers of shares or real estate.

The costs associated with buying and selling Bitcoin may also contribute to the cost base, so make sure you include those records with your tax preparation.


The Bad News for Bitcoin Bob

As for Shares, any losses you incur on the sale of Bitcoins can only be used against Capital Gains. This means that if this year, you have made no Capital Gains, the losses continue to roll over in your tax returns until you have a Capital Gain. These losses can offset Capital Gains from the Sale of Shares or Property, however they can not be used against other taxable income.


Consider yourself a Trader?

There may be another option if you consider yourself a trader of Bitcoin.

As with Share Traders, the proceeds and losses from trading may be considered as assessable income and deductions.

While any one factor may be business like, the factors are considered as a whole when determining whether the activity constitutes carrying on a business.

To be considered as a trader, the ATO will consider the following:

  • Nature of the activities and whether they have the purpose of profit-making
  • Repetition, volume and regularity
  • Degree of Organisation as a business
  • Amount of Capital invested



If you think this is you, then you will have some homework to complete, and you need to have a chat with Rob at Wall Business Services.



In a nutshell…

Taxes are one of life’s guarantees and as with anything related to making money, the ATO wants some of the pie.

But since you have been reading these blogs for the past year, you are now a good little tax payer that has kept records of all the buying and selling that you have done this year (even if this resides in a shoebox).


 – Karen Patterson, with Matthew Storer