The Australian Taxation Office (ATO) administers the Australian Tax System, and they went early on looking at Digital Assets. In 2014, the ATO published guidance on the tax treatment of digital assets.
Firstly, it is essential to note that Australia has a self-assessment tax system. You tell the ATO what tax you pay. Then, if questioned by the ATO, you need to prove that you have done it right! If not, there may be additional fees and penalties on top of any tax shortfall.
What was the ATO guidance? Treat all Digital Assets like BTC, and each Asset is considered a capital asset and assessed under the capital gains tax regime.
This, put simply, means that Digital Assets are treated like shares. You buy and sell 100 BHP; any profit is a capital gain, and any loss is a capital loss.
Now you can look to various tax legislation and case law to try and mount an alternative position – such as personal use, hobby, gambling, in business, but you run the risk of the ATO saying no. Then it could get taken through the courts and could get costly. You need to work out if it makes economic sense to pursue it.
The biggest challenge then becomes the paperwork. If the investment was a share using a trading house – they are very experienced in tax matters, providing beautiful reports to assist investors at tax time. But with all the CEX and DEX, the documentation is lacking and then if the exchange goes “poof”, – where do you get the information?
So, third-party platforms can greatly assist. Crypto tax calculator ( https://cryptotaxcalculator.io/au ), Koinly ( https://koinly.io/au ), and Syla ( https://www.syla.com.au/ ) all provide assistance in getting the tax obligations sorted.
All three have tax experts in their development teams.
They integrate through API to various wallets and CEX and permit uploading CSV’s. Some will even integrate with Opensea for your NFT assets as well.
These are essential when dealing through multiple wallets and exchanges with 10,000’s of transactions.
Remember it is still BS in / BS out – but these platforms take some of the tax pain away…….