From Bitcoin to Ethereum, crypto assets are becoming increasingly mainstream in Australia. But the tax implications can be a nightmare to wrap your head around. We often get asked questions like, “is there GST on cryptocurrency?”, “When is crypto trading considered a business by the ATO?”, and “How do I calculate capital gains tax on my cryptocurrency?”
Knowing the answers to these questions is crucial if you want to avoid paying too much tax while staying on the right side of the ATO. Of course that’s what you want, which is why we’ve created this comprehensive guide to crypto, GST, and taxes in general.
While the crypto space has seen its share of scams and rug pulls, those risks are beyond the scope of this article. Instead, we’ll focus on legitimate business use cases for cryptocurrency and the tax obligations that come with them.
This guide covers everything you need to know about crypto taxation in Australia. By the end, you’ll have a solid understanding of:
- GST treatment of digital currency
- How to determine whether you’re running a crypto business
- When to register for GST
- How to handle international transactions
- What your record-keeping requirements are
- And special considerations for mining and emerging crypto assets
First, The Basics: Is There GST on Cryptocurrency?
Since 1 July 2017, the ATO has made it clear that sales and purchases of digital currencies are not subject to GST. Good news for traders—you won’t have to pay GST on sales, but the flip side is that you can’t claim GST credits for purchases when you use or trade digital money.
The story changes if you’re running a business that transacts in digital currency or accepts crypto as payment. In these cases, GST consequences need careful consideration. Here’s why:
When your business accepts crypto as payment for goods or services, the transaction is treated as two separate events for tax purposes:
- The sale of your goods or services (which may attract GST)
- The acquisition of digital currency (which is input-taxed)
For example, if your retail business sells products and accepts Bitcoin as payment, you’ll still need to:
- Calculate and remit GST on the sale based on the Australian dollar value of the crypto at the time of the transaction
- Record the acquisition of the Bitcoin at its AUD value
- Account for any capital gain or loss when you eventually dispose of the Bitcoin
Similarly, if your business model involves buying and selling cryptocurrency, different GST rules apply depending on whether you’re dealing with Australian residents or international customers. These distinctions affect whether your crypto trades are input-taxed financial supplies, or GST-free supplies, which directly impacts your GST reporting obligations and potential credit claims (we get deeper into these details below).
Pro Tax Tip: Crypto exchanges operating in Australia must register with AUSTRAC as financial service providers. No shortcuts here—compliance is mandatory.
Are You Running a Crypto Business? The ATO’s View
Understanding whether the ATO considers you to be running a business is crucial for assessing your GST obligations. The tax department asks several questions when assessing a business:
- Do you operate under a registered business name with an Australian Business Number (ABN)?
- Do your activities demonstrate a clear profit motive?
- Do your transactions follow consistent patterns, with proper business records, separate bank accounts, and appropriate licenses?
- Do you conduct repeated business transactions in an organised, business-like manner?
Pro Tax Tip: Once your business hits an aggregated annual turnover of $75,000, GST registration becomes mandatory. You’ll report GST obligations through your Business Activity Statement (BAS) and can claim GST credits on transactions other than digital money.
It’s also worth noting that GST turnover calculations exclude input-taxed sales, which includes sales of digital currency. If your only business activity is selling digital currency, you might not need to register for GST, though normal income tax rules still apply.
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When to Register for GST (Even If You Don’t Have To)
Registering for GST is optional if you’re below the $75,000 threshold, but might be worth considering based on:
- Your tolerance for the additional record-keeping and reporting requirements
- Whether GST applies to your other taxable sales
- Your ability to claim GST credits on creditable purchases
- Potential GST credits on reduced credit acquisitions
You might be able to claim GST credits from associated services like commission costs, brokerage fees, services enabling digital currency trading, and charges from financial institutions.
GST-Free Crypto Sales to Non-Residents
When selling digital currency to non-residents for Australian taxation purposes, your sales are GST-free. This means you don’t charge GST on these sales but can still claim GST credits for costs incurred while making those sales. Standard GST registration requirements still apply.
Using Digital Currency for Business Transactions
Using crypto to pay for business goods and services has no GST consequences by itself. For GST purposes, digital currency is treated like cash.
However, receiving digital currency as payment for goods or services follows normal GST rules. If you make a taxable sale and receive crypto as payment, you’re required to collect GST (or remit 1/11th of the payment) for that sale. This amount must be reported on your BAS in Australian dollars.
Tax Invoice Requirements for Crypto Payments
When issuing invoices for payments in digital currency, you need to include:
- Sufficient evidence to calculate the GST component in Australian dollars (stated price/value, conversion rate, or a statement showing the GST calculation)
- The standard information required on all tax invoices
- The amount payable in Australian dollars, including GST in Australian dollars
Capital Gains Tax: The Other Side of Crypto Taxes
In Australia, crypto assets are considered capital assets for tax purposes, making them subject to Capital Gains Tax (CGT). These gains or losses must be reported in your income tax return, with income tax paid on gains as part of your assessable income.
The percentage of tax you pay aligns with your personal income tax rate. Any earnings over $18,200 are subject to income tax at your marginal rate. For more information on Capital Gains Tax, visit our guide to what triggers a CGT event.
Pro Tax Tip: Holding crypto for more than 12 months might qualify you for a 50% discount on capital gains for that asset. A decent incentive for long-term investment strategies.
The ATO’s Data-Matching Program: They’re Watching
The ATO has sophisticated data matching programs that they use when checking trading crypto. It’s likely that they already have your data from your exchanges, and they can go as far back as 2014. The ATO also receives your “know your customer” (KYC) information when you sign up for an Australian exchange or wallet.
Over the past three years, the ATO issued letters of warning that crypto was taxable and that it needed to be declared in individuals and businesses annual income tax return. Failure to do so would lead to penalties for tax evasion and auditing.
Record-Keeping Requirements: Your Defence Against Audits
Keeping accurate records is a must when trading in any cryptocurrency because every transaction will need to be backed up and justified. You’ll need to calculate the cost basis of each transaction if you decide to sell or dispose of your crypto, and calculate how much tax you’ll be obligated to pay.
This means you should keep purchase and sale receipts for all crypto transactions. You must also record:
- Transaction dates and times
- Purpose of each transaction and the other party’s details (their crypto asset address is sufficient)
- Exchange records and statements
- Australian dollar value of crypto assets at the time of each transaction
- Professional service costs (accountant, legal, etc.)
- Digital wallet information and keys
- Software costs related to tax management
Pro Tax tip: Keep separate records for each crypto asset as the ATO considers them distinct CGT assets.
Retain these records for five years from the latest of: when you prepared the records, when the transactions were completed, or when the CGT event occurred.
Crypto Mining: Business or Hobby?
Is there GST on cryptocurrency when you’re mining as a business or hobby? Let’s take a look.
The tax treatment of crypto mining depends on whether it’s considered a business or a hobby. If you’re mining as a business, income from transferred mined coins is assessable, and mining expenses are deductible.
However, losses from mining activities may be subject to non-commercial loss provisions, meaning they can’t automatically offset other income without meeting specific tests. Crypto held due to a mining business is considered trading stock and must be accounted for at each financial year’s end.
When determining if your mining operation is a business, consider:
- The scale and frequency of your mining activities
- Any capital investment in specialised equipment
- Your business planning activities
- Profit motive and commercial viability
Pro Tax Tip: If your mining consumes substantial electricity and computing resources but generates minimal returns, the ATO might question whether it’s genuinely a business with reasonable profit expectations.
NFTs and Emerging Crypto Assets: New Frontier, Same Rules
Non-fungible tokens (NFTs) and other emerging crypto assets follow similar tax principles to traditional cryptocurrencies, though with some unique considerations:
- Creating and selling NFTs may constitute a business or be treated as a capital gains event
- Royalties from NFT sales are generally assessable income
- Purchasing NFTs as investments triggers CGT upon disposal
- Collectible NFTs valued above $500 may have special CGT treatment
The rapidly evolving nature of NFTs presents classification challenges, particularly distinguishing between personal use assets, collectibles, and investments. While the ATO continues developing specific guidance, the fundamental principles of income tax and CGT apply.
Pro Tax Tip: If you’re confused about whether the ATO needs to know about your NFT transactions, their website has some helpful information about NFTs.
Seeking Professional Advice: When to Call the Experts
The tax consequences of crypto can be complex, particularly if you’re running a business or accepting crypto as payment. With crypto regulations constantly undergoing updates, tax implications remain something of a moving target.
Professional guidance from a skilled tax agent is especially important if:
- Your crypto activities generate substantial income or losses
- You’re unsure whether your activities constitute a business
- You’ve failed to report crypto transactions in previous tax returns
- You’re planning to structure your crypto activities for tax efficiency
- You’re involved in DeFi, staking, yield farming, or other complex crypto activities
It’s worth seeking professional advice before making significant financial decisions. A qualified tax professional familiar with crypto assets can help you stay compliant in this rapidly changing space.
Phone 1800 367 487 to chat with a friendly ITP tax accountant who understands both tax regulations and cryptocurrency.