In advancing their attention toward the taxation of cryptocurrencies, the Australian Taxation Office (ATO) has published a reminder for taxpayers to ensure they are working out capital gains and losses correctly; highlighting the ATO’s increased data matching capabilities as a tool to identify where taxpayers have not adhered to these obligations.

Taxpayers should be aware that the sale, loss or destruction of a cryptocurrency asset may result in a disposal of a capital gains tax (CGT) asset. This disposal will in turn give rise to a CGT event and a potential liability to pay CGT on any resulting capital gain, or may give rise to a capital loss which can be utilised to reduce future capital gains.

The ATO has also restated the need for taxpayers to adequately document and keep records relating to:

any CGT event, such as the disposal of a cryptocurrency, for at least five years after the event occurred; and
any CGT event that amounted to a net capital loss, for a period of either two years (for individuals and small businesses) or four years (for other taxpayers).

This reminder is the latest in a series of publications surrounding the ATO’s continued efforts to build and monitor its increased tax framework for cryptocurrency. We have previously reported on other ATO announcements and guidance here.

Taxpayers or advisors who are uncertain of their tax obligations or how the law applies to their digital assets including cryptocurrency can contact our tax team who have specialist knowledge in this area:

Henri Sheridan
Lawyer
T +61 3 9611 0194
E hsheridan@sladen.com.au

Laura Spencer
Senior Associate
M 0436 436 718| T +61 3 9611 0110
E lspencer@sladen.com.au

Daniel Smedley
Principal | Accredited Specialist in Tax Law
M +61 411 319 327| T +61 3 9611 0105
E: dsmedley@sladen.com.au