As many as one in six Australian adults own crypto – but paying taxes on the digital asset isn’t always simple or easy.

It’s called “cryptocurrency”. but the Australian government, like most others, doesn’t consider crypto to be legal tender. It’s instead considered to be property, and as such is subject to a capital gains tax.

That’s right – you have to pay taxes on your crypto gains.

Even if you just trade one crypto against another – swapping Ethereum for Chainlink on Uniswap, for example – you have to pay taxes on your gains.

The gains are taxed at their Aussie dollar value at time of sale.

Even airdrops and hard forks are taxable, when the assets are sold.

But staking income and masternode rewards are treated as taxable income when they’re received.

The same goes for receiving crypto rewards for liquidity pool positions, by working as a yield farmer on the various decentralised exchanges.

But mining is not taxable when it is performed as a hobby.

What’s more, the government strongly urges its citizens to keep records of their crypto transactions for five years.

“It is vital to keep good records for all your transactions with cryptocurrency, whether you are using cryptocurrency as an investment, for personal use or in business,” the Australian Taxation Office’s website says.

Given that the ATO has devised ways to track Aussies’ crypto purchases, sending out hundreds of thousands of letters to remind citizens of their legal obligations, we’d say people would do well to heed this advice.

But if you’re confused by all this, well, you’re not alone.

“Many experts too find it challenging to keep up with the rapidly changing crypto tax landscape, so if you find the whole ordeal a little confusing — you are not on your own,” says the 2021 Accointing tax guide for Australia.

The platform has partnered with local tax experts to create guidelines for all the different situations crypto hodlers might find themselves in.

For those who don’t want to do the work themselves, they have an automated system of generating tax forms that costs between $109 to $399.

For more details, check out Accointing’s website here.

This article was developed in collaboration with Accointing, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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