Once upon a time, cryptocurrency felt like the wild west of finance—unregulated, unpredictable, and totally off the grid. But these days? The ATO is well and truly in the saddle. Whether you’re buying and holding, staking for passive income, flipping NFTs, or mining altcoins in your garage, the tax office wants to know what you’re up to.
And the first thing they’ll want to figure out is this:
Are you a cryptocurrency investor or a trader?
The answer isn’t just semantics. It determines how you’re taxed, whether you’re eligible for capital gains discounts, and what kind of records you’ll need to keep.
The ATO has made it clear: crypto is taxable. But how it’s taxed depends on how you use it. So, if you’ve dipped a toe (or dived headfirst) into the crypto pool, here’s what you need to know about how the Australian Taxation Office (ATO) treats your activity—and how to stay on the right side of the rules.
Investor vs. Trader: What’s the Difference?
The ATO doesn’t set a fixed threshold for when someone becomes a trader. It’s all about the nature of your activity.
The key distinction lies in intent, scale, and structure. You’re likely to be classified as an investor if you’re holding crypto for long-term capital growth. You’re likely a trader (or running a business) if you’re frequently buying and selling crypto with the intent of making a profit—and doing so in a business-like way.
The ATO looks at several key factors when determining if you’re an investor or a trader:
- Intent:
- Investor: Focused on long-term wealth building through capital growth.
- Trader: Aiming for short-term profit through regular buying and selling activity.
- Repetition:
- Investor: Trades are occasional or infrequent.
- Trader: Engages in frequent, repeated transactions.
- Structure:
- Investor: Operates casually, without formal systems or business planning.
- Trader: Runs operations in a structured, business-like way—possibly with an ABN, business name, and record-keeping systems.
- Capital Involved:
- Investor: Typically using personal funds or small amounts of capital.
- Trader: Uses a larger capital base and may reinvest profits or operate through a company structure.
- Record-Keeping:
- Investor: Keeps basic records required for capital gains tax events.
- Trader: Maintains detailed business records, tracks stock/inventory, and reports like a business.
- Tax Treatment:
- Investor: Reports capital gains and losses under CGT rules.
- Trader: Reports business income and expenses as part of assessable income—CGT discounts do not apply.
For more detail, the ATO provides a helpful comparison for investing vs trading shares, which also applies to crypto.
If You’re a Crypto Investor
For most Australians dipping their toes into cryptocurrency, the ATO is likely to view you as an investor rather than a trader. This classification typically applies when you’re engaging with crypto as a form of long-term wealth building, rather than running a structured, profit-driven enterprise. In other words, if you’re buying Bitcoin or Ethereum with the goal of holding onto it for months or years in the hope that its value will increase over time, you’re probably operating on what’s called the capital account—which means capital gains tax (CGT) rules apply.
You’re likely to be an investor if:
- You buy and hold cryptocurrency for extended periods, often waiting for the market to appreciate before making a sale or swap, rather than executing frequent trades or using advanced trading strategies.
- Your main objective is long-term capital growth, rather than earning regular income through short-term profits. You’re investing, not “working” the market daily.
- Your crypto activity is secondary to your main job or business—you might hold a salaried position, freelance, or run a small business, with your crypto portfolio simply acting as a side investment.
- You haven’t structured your crypto activity in a way that resembles a business—meaning there’s no formal business plan, no branding, no registered business name or ABN, and you don’t treat your crypto trading as a commercial operation.
- You treat your digital assets the same way you would shares or exchange-traded funds (ETFs)—buying, holding, and selling occasionally, but not engaging in systematic buying and selling activity.
While there’s no hard-and-fast checklist, the ATO will consider all of these factors together when determining whether your crypto activity is investment-based or business-like. If most of your actions resemble those of a casual investor, you’ll be taxed accordingly.
How You’re Taxed as an Investor
If you fall under the “investor” category, you’re taxed under the capital gains tax (CGT) regime, just as you would be with traditional assets like shares or property.
- Any disposal of cryptocurrency triggers a CGT event. This includes not just selling your crypto for fiat currency like Australian dollars, but also swapping one cryptocurrency for another, gifting it to someone else, or even using it to purchase goods or services. These are all considered disposals under tax law, regardless of whether you made any actual profit at the time.
- If you hold your crypto for more than 12 months before disposing of it, you may be eligible for the 50% CGT discount. This can significantly reduce your tax liability, especially for large gains.
- If you make a capital loss, you can use that loss to offset capital gains you’ve made in the same financial year. If your losses exceed your gains, the leftover amount becomes a net capital loss, which you can carry forward to future tax years to offset future gains. However, capital losses can’t be used to reduce other types of income, such as salary or business income.
Common Examples of CGT Events
Here are some typical scenarios that would trigger a CGT event for crypto investors:
- Selling crypto for AUD – For example, cashing out your Ethereum after a price increase.
- Swapping one crypto for another – If you trade Bitcoin for Solana, even though you haven’t converted anything to cash, the ATO still considers this a disposal and acquisition event.
- Gifting crypto to a friend or family member – Yes, even gifts are treated as disposals under tax law. You’ll need to calculate the gain or loss as if you sold it at market value.
- Spending crypto on goods or services – Paying for a holiday, buying a laptop, or purchasing a concert ticket using crypto are all considered CGT disposals.
In each case, the ATO will require you to determine the cost base of your crypto (what you paid for it, including any fees or costs of acquisition) and subtract it from the capital proceeds (what you received or what the asset was worth at disposal). The result is your capital gain or loss.
A Practical Example
Let’s say you bought 1 ETH back in early 2023 for $2,000, including transaction fees. You held it for 18 months and then sold it in 2025 for $3,000.
- Cost base = $2,000
- Capital proceeds = $3,000
- Capital gain = $1,000
Because you held the asset for over 12 months, you’re likely eligible for the 50% CGT discount, which means you’ll only need to include $500 of the gain in your taxable income.
This discounted gain will be added to your other assessable income and taxed at your marginal income tax rate.
Staying Compliant as a Crypto Investor
Even as a casual investor, the ATO expects you to keep detailed records of every crypto transaction that could impact your tax position. This includes:
- Dates of purchase and disposal
- The AUD value of the crypto at the time of each transaction
- What the transaction was for (e.g. swap, sale, gift, spend)
- The fees or costs incurred (brokerage, exchange costs)
- Transaction IDs and wallet addresses
You’ll need to keep these records for at least 5 years after a CGT event. Tools like CoinTracking, Koinly, and CryptoTaxCalculator can help automate this process and produce tax reports compatible with the ATO’s expectations.
Read the ATO’s full guide on crypto as an investment
If You’re a Trader (Running a Business)
On the flip side, if you’re trading crypto frequently, treating it as your job or main income source, and you operate in a structured, commercial manner, the ATO may consider you to be carrying on a business.
You’re likely a trader if:
- You execute high-volume or high-frequency trades
- You operate through an ABN or company structure
- You keep detailed records like a business (inventory, journals, financial reports)
- You market your activity (e.g. via a website or trading service)
- You’re aiming to generate short-term income, not just long-term gains
How You’re Taxed:
- Proceeds from crypto sales are treated as business income (revenue account)
- Your crypto is classified as trading stock, not capital assets
- You’re not eligible for the 50% CGT discount
- You can deduct business-related expenses, such as:
- Internet and software subscriptions
- Platform or brokerage fees
- Cost of crypto used in transactions
- Accountants or legal fees related to the business
ATO guidance on crypto used in business
A Quick Case Study:
Jake runs a small-scale NFT flipping operation.
He buys and sells dozens of NFTs per month, keeps detailed sales records, uses pricing tools, and earns $40k/year from this alone.
The ATO is likely to classify Jake as a trader, and his earnings will be taxed as ordinary income, not capital gains.
Staking, Airdrops & Forks: Income First, CGT Later
Crypto isn’t just about trading anymore. ATO guidance now covers:
Staking Rewards: If you earn crypto through staking, the tokens received are taxed as ordinary income at the time you receive them. Later, when you sell or swap those tokens, CGT applies on any gain (difference between value at time of receipt vs disposal).
Airdrops: Same deal. Airdropped tokens = income when received, CGT when disposed.
Forks: Forked tokens aren’t taxed when received unless the fork has an identifiable value. If it does, income tax may apply.
ATO guide on staking, forks and airdrops
DeFi and Wrapped Tokens: Yes, They’re Taxable Too
2025 ATO guidance makes it clear that DeFi and “wrapped” tokens can trigger CGT events.
Examples:
- Wrapping ETH into wETH is a CGT disposal
- Lending crypto via a smart contract = disposal and reacquisition
- Borrowing against your crypto = not a disposal unless the protocol auto-sells or transfers assets
The ATO treats these actions as changing ownership or asset structure, even if you haven’t cashed out.
ATO guidance on DeFi and wrapped assets
Don’t Forget About NFTs
Non-fungible tokens (NFTs) are treated just like crypto assets when it comes to tax. Unless you’re buying a digital collectible purely for personal use (rare), any sale, swap, or use is a CGT event.
You’ll need to report gains or losses in your return—just like you would with Bitcoin or Ethereum.
How to Keep Records the ATO Will Accept
Record-keeping might not be exciting, but it’s essential—especially in a space as complex as crypto.
What You Need to Keep:
Buying (Acquisition):
- Date of transaction
- AUD value at time of purchase
- Transaction ID or reference
- Fees or commissions paid
- Source of funds (bank transfer, card, etc.)
Holding:
- Wallet address and keys (keep secure!)
- Details of staking or airdrop activity
- Records of any forks
Selling/Swapping:
- Date and time of disposal
- Amount received (in AUD)
- Recipient address or transaction reference
- Calculations of gain/loss
- Network fees
You must keep these records for at least 5 years after the event.
Want to know more about cryptocurrencies and tax? Have a read of The Bottom Line: Is There GST on Cryptocurrency? for must-know info on crypto.
The ATO Is Watching
The ATO has significantly ramped up its data-matching capabilities and receives information directly from major crypto exchanges. If you’ve traded under your real name, the ATO likely knows—and can match your wallet to your activity.
That means:
- Crypto gains you forget to report might trigger a review or audit
- “Anonymous” wallets aren’t as anonymous as you think
- Pre-fill information in your tax return may already include your crypto trades
Final Thoughts: Get Help, Not Headaches
Crypto tax in Australia is complex. And with the ATO catching up to the technology fast, the risk of getting it wrong is higher than ever.
If you’re not sure whether you’re an investor or a trader, if you’re dealing with staking, NFTs or wrapped tokens, or if you’ve simply lost track of what happened when—it’s time to call in the experts.
Book a consultation with ITP.
Our accountants are across the latest ATO updates, and we’ll help you:
- Work out your crypto classification
- Organise your records
- Maximise your deductions
- Stay compliant
Don’t leave it to guesswork—crypto tax is one area where getting it right could save you thousands.