What is a Cryptocurrency?
Cryptocurrency according to Wikipedia is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.
There different types of cryptocurrencies. The first and most popular used cryptocurrency is Bitcoin that was created in 2009 by Satoshi Nakamoto.
Today, cryptocurrency is a very attractive investment because of its fast growth though it’s highly risky. This digital currency is transferred worldwide through a process called “mining”.
Tax treatment of cryptocurrencies in Australia
In ATO’s view, Bitcoin is just like a barter arrangement with similar tax consequences. It is either use as a money or a foreign currency. While in the US, cryptocurrencies are treated as property. According to the article written by Adam Bergman in Forbes, it is said that “From a federal income tax standpoint, bitcoin and other cryptocurrency are not considered “currency”.
How is Bitcoin taxed in Australia
In Australia, it will depend on how you acquired it and how it is being used. So, it is still advisable for you to seek a professional advisor that can help you personally if you’re entering this industry. In this blog, will cover some general information about how Bitcoin is being taxed in Australia.
First, if you are in the intention of using Bitcoin for personal use, there will be no tax implications or let’s say it can be tax-free as long as it is $10,000 or below.
Second, let’s say you acquire bitcoin with the intention of trading it and hoping to make profits on any price movements. Any profit that you derive will be taxable as part of your ordinary income.
Third, if you are an investor and looking to hold Bitcoin as an investment for the longer term, greater than 12 months, any gains/losses will be classified as capital gains for tax purposes.
Here are just a few examples of the general information about the different tax treatments of cryptocurrencies in Australia. There are different scenarios on how you acquire and how you will use Bitcoins depending on your needs. It is still best to contact a Bitcoin Accountant at our office that can help you understand the tax implications of any cryptocurrency transactions.
If you want to learn more on tax treatment for cryptocurrencies in Australia you may also visit: https://www.ato.gov.au/General/Gen/Tax-treatment-of-crypto-currencies-in-Australia—specifically-bitcoin/.