Do you invest in cryptocurrency? Here is some key information in relation to Capital Gains Tax (CGT) you need to know.
Cryptocurrency is a digital ASSET in which encryption techniques are used to regulate the generation of additional units of currency and verify transactions on a blockchain. If you are involved in acquiring or disposing of cryptocurrency, there are potential tax consequences. These will vary depending on the nature of your circumstances.
Everybody involved in acquiring or disposing of cryptocurrency needs to keep records in relation to their cryptocurrency transactions. The types of records you need to retain include for example receipts of transactions, transfers and exchange, agent or legal fees, accounting fees, software costs, digital wallet and keys.
A CGT event occurs when you dispose of your cryptocurrency. A disposal can occur when you:
- sell or gift cryptocurrency
- trade or exchange cryptocurrency (including the disposal of one cryptocurrency for another cryptocurrency)
- convert cryptocurrency to fiat currency (a currency established by government regulation or law such as Australian dollars), or
- use cryptocurrency to obtain goods or services.
Depending on your circumstances you may qualify for the CGT discount.
Source: ATO website January 2022