The Australian Taxation Office (ATO) wants to remind you that just because you no longer have cryptocurrency, it doesn’t mean you won’t get taxed on it come tax time. That also means the cash generated from the selling of an NFT is subject to tax.
It’s been a weird month for cryptocurrency fans, but it’s an opportunistic time for the ATO to remind said fans in Australia that tax doesn’t discriminate between the Aussie dollar and your internet coin.
“If you dispose of an asset such as property, shares, or a crypto asset, including non-fungible tokens (NFTs) this financial year, you will need to calculate a capital gain or capital loss and record it in your tax return,” the ATO said in a statement.
A capital what-now? Generally, a capital gain or capital loss is the difference between what an asset cost you and what you receive when you dispose of it. In this context, a capital gains tax (CGT) event occurs when you dispose of your cryptocurrency. A disposal can occur when you: sell or gift crypto, trade or exchange crypto, convert crypto to a fiat currency or use crypto to buy goods or services.
The ATO said that if you make a capital gain on the disposal of cryptocurrency, some or all of the gain may be taxed.
“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year. Remember you can’t offset your crypto losses against your salary and wages” ATO assistant commissioner Tim Loh said.
“Through our data collection processes, we know that many Aussies are buying, selling or exchanging digital coins and assets so it’s important people understand what this means for their tax obligations.”
The ATO said the tax consequences vary depending on the nature of your circumstances. However, it said everybody involved in acquiring or disposing of cryptocurrency needs to keep records in relation to their cryptocurrency transactions. On top of this, it highlights that if you have transacted with a foreign cryptocurrency exchange you may have tax responsibilities in another country, not just Australia.
For those of you wondering how the ATO will know you flogged your coin back in January, it’s actually had a data-matching program in place since 2019. Under the program, the ATO said it has collected data on cryptocurrency transactions for the 2014-15 to 2019-20 financial years.
“This protocol outlines our approach to collecting a further three financial years of data up to and including the 2022-23 financial year,” it added.