Cryptocurrency. Relatively new in the investment space, some of us were lucky to have invested before the boom, and some of us are new to enter. If you’re thinking of making an investment, here’s what you need to know.

For every Australian involved in the buying or selling of cryptocurrency, a clear record must be kept. This includes all local and foreign exchange.

The selling disposal of cryptocurrency involves the following:

• The sale or gift of;
• trade or exchange;
• convert cryptocurrency to fiat currency, such as Australian dollars, or;
• using cryptocurrency to obtain goods or services.

If you make a capital gain when disposing of cryptocurrency, some or all the amount gained may be taxed. We’ve summarised this below.

Here’s how the tax will be treated

For business

• If the disposal of cryptocurrency is a part of a business you carry on, any profits will be considered as ordinary income and not capital gains.
• For all businesses that are involved in the trading, mining or exchange of cryptocurrency – trading stock rules apply. This means:
  • Profits made from sale are considered ordinary income and;
  • The cost of acquiring cryptocurrency is deductible

For personal and investment use

• Cryptocurrency is considered a personal asset if it is kept or mainly used for personal use or consumption, normally over a short period of time. If the currency is held for longer periods of time, this may be considered an investment.
• If you acquire cryptocurrency as an investment, you may have to pay capital gains tax. Capital gains tax is only paid once you have disposed of it.

For all information on the taxation of cryptocurrency, view the ATO website.