CRYPTO TAX & REGULATIONS

ATO Crypto Reporting Explained, What You Must Declare and Why It Matters

One of the most misunderstood parts of the crypto landscape is understanding the tax aspect. Not because reporting crypto is impossible, but because it’s rarely explained clearly. Between exchanges, wallets, swaps, staking, and DeFi activity, many everyday investors are left unsure what actually needs to be reported and why.

The truth is, crypto tax doesn’t need to be overwhelming. Once you understand how tax offices view cryptocurrency, what counts as a taxable event, and how to keep simple records, the process becomes far more manageable.

This guide is designed to give you clarity. It breaks down why crypto is taxable, what activity usually needs to be reported, what typically does not, and how to approach reporting calmly and responsibly. Not to scare you, but to help you invest with confidence and remove uncertainty from your decision making.

Why Crypto Is Taxable

Most tax offices don’t treat cryptocurrency like “money.” They treat it like an asset. More like shares, gold, or property than a bank balance. That one classification is the reason crypto becomes taxable.

When you hold an asset, the tax system usually cares about two things:

What you paid for it (your cost base)
This is the value you acquired it for, plus any transaction fees. This is considered the baseline number used to measure profit or loss later.
What it was worth when you disposed of it (your sale value)
A “disposal” is any action that ends your ownership of that asset in its current form. In crypto, that includes selling, swapping, spending, and sometimes gifting.

If the value at disposal is higher than your cost base, that’s typically a capital gain. If it’s lower, it’s a capital loss. For more information about understanding Capital gains tax in crypto, check out our “Capital Gains Tax for Cryptocurrency in Australia” educational resource.

Why tax offices care so much

Crypto allows people to move value easily, & globally.. without traditional banks (no more middle man). For the first time in a long time, it’s harder for the government to track your spending habits accurately. Due to the self-custodial nature that crypto provides, governments are working double time to find ways to ensure you pay the correct amounts of tax. Just like tax applies to fiat currency, cryptocurrency can be used in a multitude of ways:

It can generate profits just like any other investment asset
It can be used as payment in place of cash
It can create income streams like staking rewards
It can be moved between platforms quickly, which increases the risk of underreporting.

It’s not just when you cash out

A common misconception is “I only pay tax when I swap my crypto into fiat and transfer it to my bank.”

In most jurisdictions, tax is triggered when you realise a gain, which usually happens when you dispose of crypto, even if you never touch fiat. That’s why swapping BTC to ETH can be taxable, because you’ve effectively sold one asset to buy another.

Crypto is taxable for the same reason other investments are taxable. If you can make money from it, trade it, spend it, or earn it, the tax system will almost always want that activity reported in some form.

What Crypto Activity Typically needs to be Reported

When it comes to crypto tax, the key thing tax offices usually care about is activity that changes your financial position. In simple terms, if something you did with crypto resulted in value being realised, earned, or exchanged, it likely needs to be reported.

Below are the most common crypto activities that typically trigger a reporting obligation.

Selling Cryptocurrency for Fiat

This is the most straightforward example.

If you sell crypto for fiat currency such as dollars, euros, or pounds, you’ve clearly realised a gain or loss. The tax office will usually want to know:

What you paid for the crypto
What you sold it for
The difference between the two

This applies whether you sell a large amount or a small one. Size doesn’t change the obligation, only the outcome.

Swapping One Cryptocurrency for Another

Many investors are surprised to learn that swapping crypto to crypto is often reportable.

When you trade one asset for another, such as BTC to ETH or ETH to a stablecoin, you are disposing of the first asset. Even though no cash hits your bank account, the value of the asset at the time of the swap is usually used to calculate a gain or loss.

From a tax perspective, this is treated similarly to selling one asset and buying another at the same moment.

Spending Crypto on Goods or Services

Using crypto to pay for something is also commonly considered a disposal.

Whether you’re paying for:

A product
A service
A subscription

The tax office often treats this as if you sold the crypto at its market value and then spent the cash. Any difference between what you paid for the crypto and its value at the time of spending can create a gain or loss. In most cases in Australia, due to the current view of crypto from a taxation perspective as a capital gain; when you spend $50 worth of crypto in a store, you’re actually paying two types of tax. First is the GST that is attached to the product, second is the CGT from converting your crypto into fiat. Despite the purpose of crypto being to spend your funds rather than sell them, Australian tax doesn’t quite reflect that purpose as of yet.

Receiving Crypto as Income

Crypto received as income is usually reportable at the market value when you receive it.

This can include:

Staking rewards
Mining rewards
Yield or interest from DeFi protocols
Airdrops
Salary or payments received in crypto

This activity is often treated as ordinary income first. If you later sell that crypto, a second taxable event may occur when you dispose of it.

Earning Through DeFi and Protocol Participation

Decentralised finance can involve multiple reportable events in a short period of time.

Activities such as:

Providing liquidity
Yield farming
Token rewards
Wrapping and unwrapping assets

Whilst less commonly practised by crypto holders, these actions may each create their own reporting obligations depending on how they’re structured and how the tax authority views them.

This is one area where record keeping becomes especially important.

Gifting Cryptocurrency

In some jurisdictions, gifting crypto is treated as a disposal at market value. That means even though you didn’t receive money, a taxable event may still occur.

The person receiving the gift may also have tax implications later when they dispose of it.

What Usually Is Not a Taxable Event

Not every crypto action creates a tax obligation. A lot of confusion comes from assuming that any movement of crypto automatically means tax is owed. In most cases, tax is tied to realising value, not simply holding or moving assets.

Below are common crypto activities that are usually not considered taxable events, depending on your local tax rules.

Buying Cryptocurrency With Fiat

Purchasing crypto using fiat currency is typically not taxable.

When you buy crypto, you are simply acquiring an asset. No profit or loss has been realised at that point. However, this transaction is still important because it establishes your cost base, which is used later when calculating gains or losses.

Keep records of:

Purchase date
Purchase price

If you’re still trying to figure out which exchange best supports your investing goals, we have compiled “The Best Crypto Exchanges in Australia for 2026” to help you make that decision.

Holding Cryptocurrency Without Selling

Simply holding crypto, regardless of how much its value rises or falls, does not usually trigger tax.

Unrealised gains are not taxed. Tax typically only applies once you dispose of the asset through selling, swapping, or spending. This is why long term investors can hold through multiple market cycles without creating annual tax obligations, as long as they don’t transact. If holders maintain their untouched portfolio for greater than 12 months, they also receive a substantial tax benefit when they eventually realise their gains/losses. Learn more about that here: “Capital Gains Tax for Cryptocurrency in Australia”

Transferring Crypto Between Wallets You Own

Moving crypto between your own wallets is not a taxable event.

Examples include:

Transferring from an exchange to a hardware wallet
Moving funds between two personal wallets
Consolidating assets for security purposes

Although these transfers are not taxable, they should still be recorded. Clear records help prove ownership continuity if questioned later.

Changing Wallet Types

There might come a time where you’re ready to upgrade your primary wallet. Maybe you’ve grown your portfolio large enough that it wouldn’t hurt to invest in more security. When that time comes, the good new is you won’t have to pay any tax on that fund transfer. (We have a full guide that walks you through how to transfer crypto from one wallet to another here.

Switching between:

Hot wallets and cold wallets
Software wallets and hardware wallets

As these changes in wallets do not change ownership of the asset, this activity is generally not taxable. If your not sure which wallet is right for your investing goals, check out “Which Cryptocurrency Wallet is right for you” educational resource here.

Cancelling or Failed Transactions

If a transaction fails or is cancelled and no crypto leaves your control, there is usually no taxable event. However, any fees paid may still be relevant for record keeping.

Important Clarification

While these activities are usually not taxable, that does not mean they should be ignored.

Good record keeping is essential. Tax authorities often expect you to be able to explain where assets came from, where they moved, and why no tax was triggered.

By now you’re probably thinking how this whole process seems to be a lot to handle. And for most people, finding the time to keep record of each transaction is near impossible. If this sounds like you, we invite you to reach out to the Shepley Capital team where we’ll help you set up a manageable way to succeed.

What Happens If You Don’t Report Crypto

Not reporting crypto doesn’t usually lead to immediate consequences, but it can create problems over time.

As tax authorities increase their focus on digital assets, unreported activity may be identified later through exchange data, blockchain analysis, or audits. When this happens, investors may be required to amend past returns, pay back taxes, interest, or penalties.

In most cases, issues arise not from intentional wrongdoing, but from misunderstanding obligations or poor record keeping. That’s why being proactive is always easier than fixing mistakes years later.

The key point is simple. Honest reporting reduces stress, protects you long term, and allows you to invest with confidence instead of uncertainty.

Why Record Keeping Is So Important

In crypto, record keeping is everything.

Because the crypto & blockchain space is highly self-custodial, the responsibility to track activity almost always sits with the investor. Unlike traditional finance, there is rarely a single statement that captures everything for you.

This is why good records make tax reporting manageable, and poor records turn it into a stressful guessing game with real consequences.

Accurate record keeping helps you:

Calculate gains and losses correctly
Prove ownership and transaction history if questioned
Avoid overpaying or underpaying tax
Reconstruct activity across wallets, exchanges, and platforms

This process also gives you clarity over your own investing behaviour. Many investors don’t realise how often they trade, swap, or earn rewards until they see it written down.

At a minimum, records should include:

Dates of transactions
Assets involved
Amounts sent or received
Market value at the time
Fees paid
Wallets and exchanges used

Trying to recreate this information years later is difficult and sometimes impossible. Keeping records as you go turns tax from a source of anxiety into a routine part of responsible investing.

In crypto, control comes with responsibility. Record keeping is how you honour both.