Decrypting tax time: Your top crypto tax questions answered

Special Report: As the saying goes, only two things in life are certain: death and taxes. With 52 per cent of Australian crypto investors reporting a profit in 2025, tax time is top of mind.

Words by James Quinn-Kumar, Director of Community Engagement, Binance Australia and New Zealand

Over the past year, Bitcoin (BTC) has soared by over 94 per cent and is now valued at more than AUD $188,000 following two consecutive record highs in July alone.

Stablecoins also surged to reach a combined market cap of USD $250 billion for the first time, while Ethereum (ETH) rebounded.

More than 30 per cent of Australians now hold crypto in their investment portfolios, and strong performance means many investors will have healthy gains to report.

Binance welcomed a panel of crypto taxation experts to help take the stress and confusion out of this year’s tax return.

Here are your top 5 questions answered…

Is my crypto a currency or an asset?

Despite the name, cryptocurrency is in fact an investment asset. This means Capital Gains Tax (CGT) may apply to any profits made. Assets held for less than 12 months are usually taxed at the individual’s personal income tax rate, whereas assets held longer may be eligible for a 50% CGT discount. However, individual circumstances vary, and it is important to consider each case carefully.

Investment losses could potentially be used to offset capital gains or carried forward, but generally, losses cannot be applied against personal income. Maintaining thorough records is advisable, as tax authorities generally require supporting documentation for a number of years following any claims.

Is my crypto an investment, business, or hobby?

Most investors holding crypto for capital growth would treat it as an investment subject to CGT rules. There are, however, a few exceptions.

For traders, and those using trading bots, your crypto holdings may be considered business activity and different tax rules may apply. In this case, you may decide to calculate the cost of purchasing crypto, declare your sales income, and calculate the change in value.

Investing in crypto as a hobby? It may be hard to successfully secure a tax exemption on any profits, especially if you held onto the asset for a long time to realise gains. It is always best to seek professional advice from a lawyer and / or an accountant.

What is a taxable event?

A taxable event is any transaction where you make a capital gain or loss. Many types of cryptocurrency transactions can give rise to tax consequences, including swapping one crypto asset for another or paying transaction (gas) fees. For example, exchanging ETH for Tether (USDT) may be treated as a disposal that triggers reporting obligations.

It is a common misconception that tax is only payable upon converting crypto to fiat currencies, like Australian dollars. Various transactions may be taxable, so comprehensive record-keeping is important.

An exception is often made when moving crypto between wallets you control, provided no gains are realised or withdrawn.

What records should I keep? 

The Australian Taxation Office (ATO) encourages keeping detailed records of all crypto transactions, including dates, AUD values, quantities, and types of assets involved.

Your annual statements should show this detailed information. For Binance users, statements can be easily accessed and downloaded via the Binance app or platform. Taxation software may also be helpful to keep track of this data.

Tax records should generally be kept for at least five years to satisfy tax compliance requirements.

How can I plan to manage tax liabilities on crypto?

It is important to approach tax planning carefully and in line with legal requirements. Some common strategies investors may consider include:

1. Tax loss harvesting – Selling poor-performing assets at a loss may be a way to offset profits from other trading activity. This strategy can be used to reduce your overall taxable income, just be aware that wash trading is illegal (e.g. selling and buying back the same asset deliberately for a tax advantage).
2. Long-term Investing – If a crypto asset is held for at least 12 months, then a 50% CGT discount may be realised. This can significantly reduce your overall tax liability, so keep note of when assets were purchased to take advantage of this strategy.
3. Cost basis methods – Different accounting methods like FIFO (first-in,first-out), LIFO (last-in, first-out), and others can be used to calculate the most efficient tax outcome for an individual.

Specialised software, such as Koinly, Syla, or Crypto Tax Calculator, may be helpful tools for tax management and planning, but their use should be combined with professional advice.

Paying tax on crypto gains is a sign of investment success – taking home healthy profits from your investment strategies. However, tax time can undoubtedly be overwhelming and confusing, particularly for new investors.

It’s important to remember there are many helpful resources available, including consulting the ATO website or employing a tax professional. Tune into Binance’s tax time episode to hear all user questions answered.

Disclaimer:

This article is intended to provide general information only and does not constitute professional tax advice. Binance does not provide tax, legal, or financial advice. Tax laws and regulations are complex and subject to change, and their application depends on individual circumstances. You should seek advice from a qualified tax professional or registered tax agent to understand your obligations and options.

 Readers are also advised to consult the Australian Taxation Office (ATO) official website (https://www.ato.gov.au/ ) and other relevant regulatory sources for the most current and authoritative information.

 Third-party software or services mentioned are provided as examples only. Binance does not endorse or guarantee the accuracy, reliability, or suitability of any external tools or products. Users should perform their own due diligence and consult a professional before making decisions based on such software.

James Quinn-Kumar is the director of community engagement at Binance Australia & New Zealand.

The views, information, or opinions expressed in the interviews in this article are solely those of the contributing author and do not represent the views of Stockhead.

This article was developed in collaboration with Binance, 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.