It’s tax time, and we’ve sourced a tax pro to answer your questions on everything cryptocurrency & tax. Our guest for this “Ask Me Anything” is Neil Billyard, Partner in Charge of Tax at BDO Sydney.
Neil has over 25 years of experience advising clients. As an experienced tax specialist, Neil has worked with clients including large ASX listed corporate groups, through to private family enterprises. He has consulted with the Australian Government and Treasury on a variety of international tax reform issues, culminating in the introduction of the ‘foreign hybrid’ rules. He has held several leadership positions including lead partner of International Corporate Tax, China Tax Practice, and People, Performance & Culture, as well as his current role as Partner in Charge of Tax.
Please note that as with this post and others, these answers & information do not constitute financial advice – you should always consult a financial professional on your particular situation.
At what level does capital gains (CGT) tax apply? Are there different brackets of CGT you can fall into?
CGT tax is a part of income tax and is levied at the marginal tax rate of the entity.
If the taxpayer is a company, the CGT tax rate is 27.5 % (for a base rate entity) or 30%. A company cannot claim 50% CGT discount.
If the taxpayer is an individual, the CGT tax rate can vary from 0% to 47%. depending on the taxpayer’s all assessable income in the year CGT happens. An individual can claim 50% CGT discount if the asset is held for more than 12 months, that is only if half the gain is taxable but at the marginal tax rate.
If the taxpayer is a super fund, the CGT tax rate is 15%. A super fund can claim 33% discount if the asset is held for more than 12 months, thus reducing the rate to 10%.
What if I slowly sell my Crypto in batches?
If you are holding Crypto on CGT account (i.e. as an investment), capital gains or losses are accumulated little by little if you sell in batches.
Likewise, if you are holding Crypto as trading stock (i.e. carrying on a business), you realise gain or loss as and when you sell crypto.
Under either scenario, if you are selling crypto little by little, there may be benefits of lower tax rates as the marginal rates are managed from year to year as a consequence of selling incrementally. Unfortunately, the volatility in Crypto markets does not always allow sell-downs to be managed in this way.
Tip: CoinJar customers can download a CSV export of their trading & transaction history from their CoinJar’s Settings. It comprises of a dated history of all buy/sell transfers made using CoinJar. It also includes the source and destination amounts, as well as any fees involved.
If I’ve been affected by a Crypto related scam, i.e. USI Tech or OneCoin. Can I claim the scam as a capital gains loss?
Potentially yes, if you were holding Crypto as an investment. The loss will arise when there is no way to recover the entitlement.
When does Personal Use Asset apply?
You don’t need to pay CGT for the sale of Personal Use Asset. A Crypto is not a personal use asset if it is acquired, kept and used as an investment, in a profit-making scheme or in the course of carrying on a business.
When I have a ‘Hedged Account’ with CoinJar, how am I taxed? I.e. Are we taxed on each transfer between BTC and the hedged account?
If you convert crypto to currency or if you exchange one type of crypto for another type, a CGT event happens and the tax is levied on the change in the market value of crypto. Compliance costs could be significant as individual transactions need to be tracked, with regard being had to eligible cost base, etc.
How does tax apply on CoinJar Swipe Card purchases?
Any transaction giving rise to an acquisition or disposal of Crypto needs to be tracked and gains/losses treated as taxable, per the above.
If I’m paying my bills in Bitcoin with your CoinBPAY service, what tax regime will I fall under?
CGT as you are disposing of Crypto. Each disposal is a taxable realisation.
Five years ago, I purchased Bitcoin, and I use that BTC to pay bills. What tax regime do I fall under?
CGT, it is a disposal and any movement in value is taxable.
If I buy $100 worth of Bitcoin and the bitcoin price goes up 10x, then I purchase a product for $9999. How much tax would I effectively pay?
On the basis that bitcoin is held for investment, an individual taxpayer will pay CGT on the net capital gain of $9,899.
If I lose my bitcoin private keys, can I offset this loss against my profits?
You may be able to claim a capital loss if you lose your cryptocurrency private keys. The critical issue is establishing evidence of the time when the private keys are lost. That is, provided the Crypto is lost and unrecoverable, a CGT Event arises and hence a loss is realised.