Consultation: Substantiating cryptocurrency taxation events

3 months ago
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Table of contents for Consultation: Substantiating cryptocurrency taxation events
Overview
Record keeping
Exchanging one cryptocurrency for another cryptocurrency
Substantiating cryptocurrency taxation events - feedback form

Overview

We published public advice regarding the income tax treatment of Bitcoin, and other cryptocurrency that has the same characteristics as Bitcoin, in a series of taxation determinations in 2014. Since that time, in response to questions being asked by the community, we have made minor changes to our web guidance about the taxation treatment of cryptocurrency.

Over the last 12 months, there has been increased interest in cryptocurrency in Australia and, on 13 March 2018, we updated our web guidance Tax treatment of cryptocurrencies to address some of the common enquiries in relation to cryptocurrency transactions. Any reference to 'cryptocurrency' in this consultation refers to Bitcoin, or other crypto or digital currencies that have the same characteristics as Bitcoin.

The purpose of this consultation is to seek feedback on practical compliance issues arising from complying with taxation obligations in relation to cryptocurrency transactions. In particular, we are interested in any practical issues that may impact on taxpayers’ abilities to calculate and substantial any capital gains and losses for capital gains tax (CGT) purposes.

Your feedback may also be taken into account when developing further advice and guidance products in relation to the taxation of cryptocurrency.

This consultation is limited to the following issues:

  • record-keeping as it relates to cryptocurrency transactions, and
  • exchanging one cryptocurrency for another cryptocurrency.

Feedback on these topics can be submitted through our confidential feedback form.

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Record keeping

The CGT record-keeping rules require you to keep records of whatever can reasonably be expected to be relevant to working out whether you have made a capital gain or loss from a CGT event.

You need to keep the following records in relation to your cryptocurrency transactions:

  • the date of the transactions
  • the value of the cryptocurrency in Australian dollars at the time of the transaction (which can be taken from a reputable online exchange)
  • what the transaction was for and who the other party was (even if it’s just their cryptocurrency address).

Questions for consultation

  • Are there any practical issues that arise in relation to the CGT record-keeping rules, so far as cryptocurrency transactions are concerned?
  • Are there any specific factors that you think we should take into account when developing further public advice and guidance about CGT record-keeping for cryptocurrency?

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Exchanging one cryptocurrency for another cryptocurrency

Where you exchange one cryptocurrency for another cryptocurrency, you dispose of one CGT asset and acquire another CGT asset. Where you receive property instead of cash as part of a transaction, you are usually taken to have received the market value in Australian dollars of the property received.

You must compare the CGT cost base of the cryptocurrency item disposed of with the market value of the new cryptocurrency item obtained for all exchange transactions.

Records need to be retained for each transaction, in accordance with the record keeping rules. This means that each item is separately accounted for and recorded when it is acquired and disposed of, with relevant Australian dollar values recorded.

It does not matter how many exchange transactions you undertake. You need to undertake this process for every transaction occurring during the income year.

Questions for consultation

  • Are there any practical issues in relation to complying with the taxation obligations that arise for each cryptocurrency to cryptocurrency transaction?
  • Are there any specific factors that you think we should take into account when developing further public advice and guidance about cryptocurrency to cryptocurrency transactions?

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Next steps:

You can provide your comments via our confidential feedback form.

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