CRYPTO TAX & REGULATIONS

Cryptocurrency Tax in Australia

Crypto has evolved from once being a niche in the digital space into a financially recognised currency within Australia, & the world. And so with any form of currency within Australia, tax obligations must be met. Whether you’re buying your first coin, participating in staking or earning DeFi rewards, or actively trading, you need to know how tax rules apply to you. This guide covers how the Australian Taxation Office (ATO) treats cryptocurrencies, when tax events happen, how to calculate tax, how different activities are taxed, and how you can plan and stay compliant.

How the Australian Taxation Office (ATO) Views Cryptocurrency

In Australia, the Australian Taxation Office (ATO) treats cryptocurrency as a form of property, not as money or foreign currency. This classification means that crypto is considered a capital asset, and most transactions involving it can trigger capital gains tax (CGT) or, in some cases, ordinary income tax.

For an in-depth resource on CGT for Cryptocurrency in Australia, check our our “Capital Gains Tax for Cryptocurrency in Australia” lesson here.

The ATO’s position is that cryptocurrency ownership represents a right or interest in a digital asset, similar to owning shares or real estate. You don’t pay tax when you simply hold it, but once you sell, trade, swap, or use it for purchases, a taxable event occurs.

In practice, this means:

Investors generally fall under the CGT framework, where profits or losses are realised upon disposal.
Active traders or businesses dealing in crypto may be taxed under ordinary income rules, since their trading is treated as a revenue-generating activity.
Miners, stakers, and yield farmers may also have to declare rewards as income at the time of receipt.

The ATO is very clear that crypto is not anonymous or hidden. Exchanges operating in Australia are required to share customer and transaction data through data-matching programs, allowing the ATO to verify whether individuals are declaring crypto activity accurately. This means every trade, swap, and transaction is traceable.

It’s also important to understand that the ATO applies existing tax law to crypto, not special or new laws. Crypto transactions are assessed under standard provisions for income, capital gains, or trading stock, depending on how and why you use the asset.

For most individuals, this translates to a straightforward rule:

“If you dispose of your crypto in any way that changes ownership, it’s a taxable event”.

However, certain exceptions apply; such as when transferring between your own wallets or holding crypto purely as an investment without disposing of it.

The ATO has continued to expand its guidance as the industry evolves, covering topics like DeFi protocols, token wrapping, staking, and airdrops, clarifying that these too may trigger taxation depending on the nature of the transaction.

Taxable Events: When Does Tax Apply?

In Australia, not every crypto movement triggers tax. The key distinction is whether a disposal or income event has occurred. Understanding taxable events is critical for staying compliant and planning your tax strategy.

Disposals Trigger Capital Gains Tax (CGT)

Capital Gains Tax for Cryptocurrency in AustraliaA disposal occurs whenever you sell, swap, or use crypto, even if you’re not converting it to cash. Common examples include:

Selling crypto for Australian dollars or other fiat.
Swapping one cryptocurrency for another (e.g., ETH → SOL).
Using crypto to purchase goods or services.
Gifting crypto (in most cases, gifting is treated as a disposal).
Wrapping or unwrapping tokens, as clarified by the ATO in relation to DeFi activities.

Each of these actions requires calculating a capital gain or loss, which is the difference between your cost base (purchase price plus fees) and the proceeds received.

For a greater detailed account of Capital Gains tax within Australia, check out our “Capital Gains Tax for Cryptocurrency in Australia” Lesson.

Income Tax Triggers

Certain crypto activities are taxed as ordinary income rather than CGT. These typically include:

Mining or validating cryptocurrency.
Receiving staking or yield rewards.
Receiving crypto as payment for goods or services.
Trading as a business (frequent trading, organised strategies, or professional operations).

For these events, the market value at the time of receipt is considered assessable income.

Exemptions and Transfers

Some transactions are not considered taxable events:

Simply holding crypto in a personal wallet.
Transferring crypto between wallets you own.
Small, personal-use transactions may be exempt if the asset is primarily for personal use (rare for crypto).

How to Calculate Tax: Cost Base, Gains & Losses

Calculating tax on cryptocurrency in Australia relies on accurately determining the cost base, identifying capital gains or losses, and understanding when the 12-month CGT discount applies. This section breaks it down step by step for clarity.

Keep a look out for our Crypto tax calculator that we’ll be releasing soon.

(COMING SOON | Shepley Capital Investment Tax Calculator)

Step 1: Determine Your Cost Base (Buying Cost)

The cost base is the total amount you spent to acquire your crypto, including:

Purchase price in AUD.
Incidental costs such as exchange fees, transaction fees, and network/gas fees.

Example: You buy 1 BTC for AUD $50,000 and pay AUD $200 in fees.

Your cost base = AUD $50,200.

Accurate cost base calculation is critical because it directly affects your capital gain or loss.

Step 2: Identify the Disposal Value (Sell Value)

The disposal value is the amount you receive when you dispose of the crypto, converted to AUD at the time of the transaction.
Disposal can occur through:

Selling crypto for AUD.
Swapping for another crypto.
Using crypto to purchase goods/services.

Example: You sell the same BTC for AUD $70,000. Disposal value = AUD $70,000.

Step 3: Calculate Capital Gain or Loss

The formula for a capital gain or loss is:

Capital Gain/Loss = Disposal Value – Cost Base

Using our example:
Disposal Value (Sell Value) = AUD $70,000
Cost Base (Buying Cost) = AUD $50,200
Capital Gain = AUD $19,800

If the result is negative, it’s a capital loss, which can be used to offset other capital gains.

Step 4: Apply CGT Discount (if eligible)

Individuals and some trusts may be eligible for a 50% CGT discount if the asset was held for more than 12 months before disposal.

Example:
Capital Gain = AUD $19,800
Holding period > 12 months = 50% discount applied
Taxable Gain = AUD $9,900

This step does not apply to trading as a business, where ordinary income rules apply instead.

Step 5: Account for Losses

Capital losses can only offset capital gains (not ordinary income). Any unused losses can be carried forward indefinitely.

Example:
Year 1: Loss of AUD $5,000 on ETH
Year 2: Gain of AUD $10,000 on BTC
Net taxable gain = AUD $5,000 ($10,000 – $5,000)

This strategy is commonly referred to as tax loss harvesting.

Practical Tips for Accurate Calculations

Keep all records of transactions, including dates, amounts in AUD, wallet addresses, and fees.
For crypto-to-crypto trades, calculate the AUD value at the time of each swap.
Use professional crypto tax software or a spreadsheet to reconcile multiple wallets and exchanges.
Consider consulting a tax professional, especially if trading frequently or using DeFi protocols.

Activity-Specific Tax Treatment

Not all crypto activity is treated equally under Australian tax law. The ATO distinguishes between different intentions, transaction types, and activities, which determines whether your crypto dealings are subject to Capital Gains Tax (CGT) or ordinary income tax.

Below is a full breakdown of how the ATO categorises and taxes common crypto-related activities.

Investors vs Traders

The first major distinction is whether you are classified as an investor or a trader.

Investors:

Intend to hold crypto as a capital asset.
Subject to Capital Gains Tax (CGT) upon disposal.
Eligible for the 50% CGT discount if held longer than 12 months.
Expenses (like gas fees or exchange costs) can be added to the cost base but not directly deducted from income.

Traders (Operating as a Business):

Buy and sell crypto with the intention of making short-term profits.
Income is treated as ordinary income, and losses are ordinary losses.
Must record every trade and report it as business income.
Eligible to claim deductions on operating costs (software, internet, accounting, etc.).
Not eligible for the CGT discount.

Example:

Holding BTC for long-term growth = investor.
Flipping tokens daily or running a trading bot = trader.

For clarification, whilst the Australian taxation office recognises regular, short-term crypto transactions with the intention of making short-term profits as a Trader, this does not include you as an individual crypto enthusiast. Whilst you may very well be trading 15+ crypto coins everyday, analysing chart patterns & sniping short-term positions from the comfort of your home, this does not classify your earnings to fall under that of an ordinary income/loss as you aren’t registered as operating under a business entity. If this is you, continue referring to the requirements of capital gains tax reporting.

Staking and Earned Rewards

Staking rewards are treated as ordinary income at the time they’re received, based on their market value in AUD. Later, when you sell or dispose of those rewards, you may also incur a capital gain or loss.

Key points:

Rewards are assessable income when received.
Disposal of staked tokens creates a CGT event.
Gas fees incurred when claiming rewards can be deductible (if related to income).

Example:
You stake 10 ETH and receive 0.2 ETH in rewards worth $800 AUD.

At receipt: $800 is taxable income.
When sold later for $1,000: $200 capital gain applies.

Mining

Mining has two potential classifications: hobby or business.

Hobby Mining:

Treated as a personal hobby, not for profit.
No need to declare income or claim expenses.
Any crypto later sold is subject to CGT.

Business Mining:

Treated as an income-producing activity.
Rewards are ordinary income at market value when received.
Expenses (electricity, hardware, internet) are deductible.
Subsequent sales of mined crypto may still incur CGT.

The difference lies in scale, repetition, and intention to profit.

Airdrops

Airdropped tokens are considered taxable income at the market value when received, even if they were unsolicited.

Example: You receive 500 tokens via an airdrop worth $500 AUD.

At receipt: $500 is taxable income.
When sold later: capital gain/loss applies based on disposal price.

However, if the airdrop is from a hard fork (e.g., Bitcoin Cash from Bitcoin), the tax implications differ; the cost base of the new asset is typically zero, and CGT applies upon disposal only.

DeFi (Decentralised Finance)

DeFi is complex, but the ATO’s current view is that each transaction can trigger a taxable event if ownership or value changes.

Common taxable DeFi actions include:

Swapping tokens: CGT event.
Providing liquidity: Depending on structure, can trigger disposal of tokens.
Yield farming or lending: Income when rewards are received.
Borrowing against crypto: Not taxable unless collateral is liquidated.

Because smart contracts often involve temporary token transfers, tracking cost bases is essential to avoid errors or double-counting.

NFTs (Non-Fungible Tokens)

NFTs follow the same core tax principles as crypto assets:

Buying/selling NFTs triggers CGT.
Creating (minting) and selling NFTs is often treated as ordinary income, especially for artists or businesses.
Royalties from NFT resales are assessable income when received.

Example:

You buy an NFT for $2,000 and sell for $5,000 = $3,000 capital gain.
You mint and sell NFTs regularly = income from business activity.

Stablecoins

Despite their name, stablecoins (e.g., USDT, USDC) are treated the same as any other crypto.

Swapping stablecoins for other crypto triggers CGT.
Using them for purchases or conversions can also trigger CGT events.

This often surprises investors who use stablecoins as “cash equivalents,” but the ATO still considers each movement a taxable transaction.

Crypto Received as Payment

If you receive crypto as payment for goods or services:

It’s treated as ordinary income based on market value at the time of receipt.
When later sold, any price difference triggers a capital gain/loss.

Example:

You receive 0.1 BTC worth $10,000 as payment.
When sold later for $15,000, you incur a $5,000 capital gain.

Gifts, Donations & Transfers

Gifting crypto to someone else is a disposal event — CGT applies.
Donating to registered charities may be deductible (if properly documented).
Transfers between your own wallets are not taxable, provided you can prove ownership of both.

Record Keeping & Reporting Obligations

The Australian Taxation Office (ATO) requires every crypto investor, trader, and business to keep clear, accurate, and complete records for all digital asset transactions.

Even though many exchanges provide transaction histories, the legal responsibility to maintain proper records rests with you, not the exchange. Visit our full guide on ATO crypto reporting explained here.

The ATO’s Core Expectation

The ATO treats cryptocurrency in the same way as any other asset for tax purposes, meaning you must be able to substantiate every gain, loss, and income event.

You are legally required to keep records that show:

Date of each transaction
Value in Australian dollars (AUD) at the time of the transaction
What the transaction was for (buy, sell, swap, transfer, etc.)
Who the other party was (if known, including wallet or exchange ID)
Fees paid (gas, exchange, withdrawal, etc.)
Wallet addresses used to store or transfer assets

These records must be kept for at least five years after you lodge your tax return.

Types of Transactions You Must Record

The ATO expects complete documentation for all crypto-related activity, including:

Buying or selling cryptocurrency
Swapping one crypto for another (e.g., ETH to BTC)
Converting crypto to fiat or vice versa
Receiving crypto from airdrops, staking, or mining
Using crypto to purchase goods or services
Sending crypto to others (even gifts or donations)
Transferring between your own wallets (for verification purposes)

Even if you think a transaction is non-taxable, it still needs to be documented to prove your reasoning.

Acceptable Forms of Record Keeping

You can maintain records digitally or physically, as long as they are accurate and accessible upon ATO request.

Acceptable formats include:

Exchange statements or CSV exports
Blockchain explorers (to verify wallet transactions)
Crypto tax software reports (like Koinly, CoinTracking, or CryptoTaxCalculator)
Manually maintained spreadsheets
Invoices, receipts, or contracts for crypto-related income or payments

Not sufficient: Screenshots alone, or incomplete data exports missing key timestamps.

Using Crypto Tax Software

Because blockchain activity can generate thousands of transactions across wallets and chains, most Australian investors use crypto tax software to automate reporting.

Leading software options include:

Koinly (Australian tax settings, ATO CGT compatible)
CryptoTaxCalculator (Australian-based platform)
CoinTracking (global tax and performance tracking)
Accointing (integrates with exchanges and wallets)

These tools can:

Automatically import exchange and wallet data
Match transfers between your own wallets
Identify taxable events and cost bases
Generate ATO-ready capital gains reports

Tip: Even if you use tax software, you should still export and save the raw CSV data from every exchange and wallet once per year for backup purposes.

Hiring the Right Accountants (Crypto Informed)

For those of you that already use an account or are seriously considering outsourcing your accounting needs, a key mistake many investors make is hiring accountants who don’t specialise in digital assets.

A crypto-competent accountant will:

Understand CGT event codes (C1, C2, E2, etc.)
Know how to classify DeFi activity correctly (e.g., wrapping tokens, staking derivatives)
Advise on whether your activity qualifies as business or investment
Identify claimable deductions and timing advantages
Help with compliance during an ATO review or audit

With the cryptocurrency industry still being relatively new to mainstream investors, it’s likely that most established accountants will try to assure you that their generalised accounting knowledge is sufficient enough to handle complex cryptocurrency reports. Unfortunately many have been caught out by this statement in the past.

How to choose the right Crypto Accountant:

Look for firms explicitly listing cryptocurrency tax services.
Ask if they use or support software like Koinly or CryptoTaxCalculator.
Confirm they’re registered with the Tax Practitioners Board (TPB).
Ensure they can assist with trusts, companies, or SMSFs if you use one.

A knowledgeable crypto accountant can legally save you thousands through structure and timing advice.

Converting to Australian Dollars (AUD)

The ATO requires all crypto transactions to be valued in Australian dollars, even if they occur in foreign exchanges or involve stablecoins.

Conversion rates should be based on:

A reliable crypto exchange rate source, or
The exchange rate used on your trading platform

The key is consistency. Always use the same data source for all transactions in a given year.

Reporting to the ATO

You must report your crypto activity in your annual tax return, even if your platform does not send you a formal statement.

Depending on your status:

Individual investors report crypto disposals under the Capital Gains section.
Traders or businesses report income and expenses under Business or Trading Income.

The ATO also uses data-matching programs with major exchanges (both Australian and international), meaning it can automatically detect unreported crypto transactions.

In other words, assuming your crypto is “invisible” to the ATO is a misconception. The blockchain may be public, but your tax compliance is private… until it’s not.

Common Record-Keeping Mistakes

The ATO has identified several frequent errors among Australian crypto users:

Failing to record the AUD value at time of transaction.
Not tracking transfers between personal wallets, resulting in false “sales” being reported.
Mixing personal and business wallets.
Ignoring fees when calculating cost base or proceeds.
Losing access to historical exchange data after switching platforms.

Advice for avoiding record keeping mistakes: Create a single master spreadsheet or software record that captures every wallet, exchange, and on-chain transaction. Take the time quarterly to combine all previous transaction events in date order on your master spreadsheet.

We understand (and agree with you) that this is an extremely time consuming task that most everyday investors simply don’t have time for. That’s why we’re working behind the scenes to build resources that are tailored for the everyday investor to seamlessly support this process. Once launched, our tax reporting tool will be available to every ‘Black Emerald’ and ‘Obsidian’ Tier member to access.

Best Practices:

Export data quarterly rather than annually, to avoid losing records.
Label transactions (e.g., “staking reward,” “personal transfer”) as you go.
Keep wallet backup phrases secure, as losing access can prevent you from verifying cost bases later.
Use a consistent accounting method (FIFO or specific identification) year to year.
Consult a crypto-savvy accountant if you trade frequently or run a business.

Consequences of Poor Record Keeping:

If you fail to maintain accurate records, the ATO can:

Disallow deductions or cost base claims.
Impose fines and penalties for inaccurate lodgements.
Apply default assessments based on assumed profits.

In serious cases, repeat non-compliance can lead to audit investigation or prosecution for tax evasion.

EOFY Checklist

Before lodging your return:

Review every trade and wallet connection.
Confirm AUD conversions for all transactions.
Apply Capital losses strategically.
Export tax reports into CSV documents.
Keep copies of everything submitted.

Aim to finalise reporting by early July to avoid bottlenecks and secure faster ATO processing.

At the end of the day, crypto tax in Australia isn’t something to fear, it’s something to understand. Once you know how the ATO views your activity, how to calculate your gains, and when you can use losses to your advantage, the entire system starts to make sense.

Keep your records clean, track your trades properly, and make strategic moves that set you up long-term. If you treat crypto seriously, just like any other investment you’ll realise tax can actually work for you, not against you.

Now that you know all about Crypto Tax in Australia, our next lesson is about “Capital Gains Tax for Cryptocurrency in Australia”.