Can you claim crypto losses on taxes in Australia?

Can you claim crypto losses on taxes in Australia?

Yes, you can claim cryptocurrency losses on taxes in Australia, provided that you meet certain conditions. If you are an investor and not a professional trader, dispose of a cryptocurrency and make a capital loss, you may be able to use that loss to offset any capital gains you’ve made in the same income year. This means that you’ll only pay CGT (‘capital gains tax’) on the net capital gain for the year, which can reduce your tax liability.

To be eligible to claim a capital loss on your tax return, you must satisfy the following criteria:

1. You must have disposed of the cryptocurrency before 30 June.
2. The disposal must have resulted in a capital loss.
3. The cryptocurrency must have been held as an investment.
4. You must have kept accurate records of the transaction.

It’s important to note that you can only use capital losses to offset capital gains, not other types of income (such as salary or wages). If your capital losses exceed your capital gains for the year, you can carry forward the unused losses to offset future capital gains.

As with all tax matters, it’s recommended that you seek advice from a tax professional to ensure you’re meeting all the requirements and claiming any eligible deductions.

How do I enter crypto loss on my tax return?

If you’ve made a capital loss on your cryptocurrency investments, you may be able to use that loss to offset any capital gains you’ve made in the same income year. Here’s how you can enter crypto losses on your tax return in Australia:

1. Complete the Capital gains tax (CGT) schedule: You’ll need to complete the CGT schedule as part of your tax return. This schedule allows you to calculate your net capital gain or loss for the year.
2. Calculate your capital gains or losses: Using the information you’ve entered in the CGT schedule, you’ll need to calculate your capital gains or losses for the year. If you’ve made a capital loss, you’ll be able to use it to offset any capital gains you’ve made.
3. Carry forward any unused capital losses: If your capital losses exceed your capital gains for the year, you can carry forward any unused losses to offset future capital gains. Make sure to keep accurate records of your capital losses so you can claim them in future tax returns.
4. Lodge your tax return: Once you’ve completed the CGT schedule and calculated your capital gains or losses, you can lodge your tax return with the Australian Taxation Office (ATO).

It’s important to note that these steps are general guidelines only and may vary depending on your specific circumstances. It’s recommended that you seek advice from a tax professional to ensure you’re meeting all the requirements and claiming any eligible deductions.

What are the specific record-keeping requirements for cryptocurrency transactions that are eligible for tax deductions in Australia?

The Australian Taxation Office (ATO) requires taxpayers who hold or trade cryptocurrencies to keep accurate records of their transactions in order to claim any eligible tax deductions. Here are the specific record-keeping requirements for cryptocurrency transactions that are eligible for tax deductions in Australia for individuals:

1. Date of acquiring and selling: You should record the date and time of each cryptocurrency transaction, as well as the type of cryptocurrency and the amount bought or sold.
2. Value in Australian dollars: You should convert the value of the cryptocurrency at the time of the transaction into Australian dollars and record the amount. This is necessary to calculate any capital gains or losses.
3. Purpose of the transaction: You should record the reason for the transaction, such as whether it was for personal use, investment, or business purposes.
4. Details of the other party: While technically required, it is almost impossible to identify the other party to a crypto transaction aside from their public key 
5. Receipts and invoices: You should keep any receipts, invoices, or other supporting documents related to the transaction, including details of any fees or commissions paid as these may be part of the cost base.

Practically, this record-keeping is almost impossible without using crypto tax software like www.cryptotaxcalculator.io

Companies and trusts may have additional record-keeping requirements and should seek specific advice from a tax professional.   

It’s important to note that these record-keeping requirements apply to all types of cryptocurrency transactions, including buying, selling, trading, and using cryptocurrencies to purchase goods or services. By keeping accurate records, you can ensure that you’re able to claim any eligible deductions or capital losses and avoid potential penalties or fines from the ATO.

As always, it’s recommended that you seek advice from a tax professional to ensure you’re meeting all the requirements under the CGT rules.

How we can help

Cadena Legal is Australia’s leading crypto tax law firm. We can create a crypto tax strategy that’s tailor-made for you. Please contact us to get started.

This material is produced by Cadena Legal, an NSW registered legal practice. It is intended to provide general information and opinions on legal topics, current at the time of first publication. The contents do not constitute legal advice and should not be relied upon as such. Contact us here.