Bitcoin Tax in Australia - The Basics and An Example

bitcoin tax

The problem around Bitcoin Tax in Australia

Anyone in Australia who has owned Bitcoin (or other digital currencies) for over 12 months are likely to have significant capital gains, which if realised, create a Capital Gains Tax (CGT) liability. Yes, it is true. Bitcoin tax is a real thing and it is important to seek guidance from a licenced tax professional when doing your tax returns.

bitcoin tax bitcoin chart pricing

In the above log price chart of Bitcoin, the arrows highlight the month of March in each of the last two years.

If you did, in fact, buy Bitcoin in March 2016, you would own Bitcoin at approximately US$400-$430 or in March 2017, around US$1000.

At the time of writing (13 March 2018), the capital gain over that time equates to approximately 2,000% from 2016 and 900% from 2017.

Can I solve this Capital Gains Tax problem on my Bitcoin?

As per the Australian Taxation Offices (ATO) guidance on digital currency tax treatment, anyone who spent up to $10,000 on buying Bitcoin or other cryptocurrency as a personal use asset, can spend their cryptocurrency on goods and services and potentially be exempt from having to pay capital gains tax (CGT).

In effect, in this situation, you may not be subject to capital gains tax. But we must emphasise you need to speak to qualified tax accountants and understand your individual tax consequences.

In Australian Dollars, had you spent AUD$10,000 to buy Bitcoin in 2016, it would be worth approximately $200,000 today. Of course, in order for this gain to be CGT exempt, one would have needed to purchase the Bitcoin with the intention of it to be for personal use.

Please note that this is only our interpretation of the ATO’s advice on the tax treatment of cryptocurrencies, it is recommended that customers seek their own independent tax advice.

Case study example of a cryptocurrency investment

In 2015, as a technology fascinated individual, Stuart had been hearing about the merits of Bitcoin and its efficiency as a means of exchange for digital purchases over the internet.

Whilst he didn’t fully understand its long-term merits, he thought that buying some Bitcoin to transact over the internet sounded like a reasonable idea.

28 Bitcoin at around $350 each

At the time, Bitcoin was trading at a price of around AU$350 per Bitcoin. Not entirely sure when or how he would transact, he dove in regardless and spent just under AU$10,000 and bought 28 Bitcoin.

Over the next few months, Stuart was distracted by other events in his life and forgot about his Bitcoin. A couple of years passed by and he remembered that he’d bought some Bitcoin in 2015 and wondered where he might be able to spend it.

Sitting on over $200,000 worth of Bitcoin

When he looked at the Bitcoin price, he was most surprised to find that his Bitcoin gains had gone up in value considerably, even though he had no intention of holding onto his Bitcoin for that long.

So over the coming months, Stuart went looking for merchants on the internet that would take payment in Bitcoin for goods and services. To his dismay, there were not very many merchants offering this service.

In the end, he was able to purchase gift cards using his Bitcoin for current and future consumption and believes that these purchases, which were aligned with his original intent, should be exempt from any CGT liability.

But as you know, when it comes to tax time and paying taxes, whether it be on bitcoin transactions or selfmanaged super funds, you have to get your tax liabilities in order.

Ultimately, your tax bills are your responsibility and understanding the tax treatment of cryptocurrencies is part and parcel of buying and selling Bitcoin and other cryptocurrencies.

One thing is for sure and that is the tax authorities are keeping a very close eye on those investing in cryptocurrencies and Initial Coin Offerings (ICOs).

A good rule of thumb is to get your personal finance and record keeping in order, find a quality CPA accountant in Australia and deal with your cryptocurrency taxes accordingly. 

Other helpful links:

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Use Digital Currency – How it works

How our Bitcoin Gift Card works

What is a Bitcoin Gift Card?

A Bitcoin Gift Card is the perfect way for the newcomer to get their first Bitcoin. It comes with a paper wallet and simple instructions to set up a software wallet so that you can transact with Bitcoin over the internet. Bitcoin Gift Cards are available in AU$25, $50, $100 and $500 denominations.

Who should buy a Bitcoin Gift Card?

Anyone new to Bitcoin will find no easier way to get their first Bitcoin.

They can be gifted by an existing cryptocurrency enthusiast, or bought by anyone wanting to get involved for the first time themselves.

How can I pay for my Bitcoin Gift Card?

You can pay with either cryptocurrency through our payment gateway, or you can use Australian Dollars through our POLI Pay facility.

Can I use a Bitcoin Gift Card to top up an existing software wallet?

Yes. When you receive your additional Bitcoin Gift Card, you can simply import the "Secret" wallet identifier from your Bitcoin Gift Card into your existing software wallet. This will move your Bitcoin from your Bitcoin Gift Card into your existing software wallet. 

What does my Bitcoin Gift Card include?

Your Bitcoin Deposit, wallet and key generation and network transfer.

How long does it take to receive my Bitcoin Gift Card?

Going through to checkout takes about 2 minutes. You won't find an easier process anywhere. Once you've placed your order, it can take between 10 and 60 minutes to receive your Bitcoin Gift Card depending on the speed of the Bitcoin network at time of purchase.

How our Flexi eGift Cards work

We have partnered with GiftPay, an aggregator of online deliverable eGift Cards in Australia.

Through our agreement with GiftPay, you are able to purchase a Flexi eGift Card from us, redeemable at a broad range of retailers in Australia.

Watch the Video to see how it works

What is a Flexi eGift Card?

A Flexi eGift Card is an electronic gift card that lets you choose where you'd like to shop! In the past if you were given a gift card for a particular shop but didn't want to buy anything from that shop, you were stuck. But now with a Flexi eGift Card, you get to choose at which shop you spend your gift. 

What's more, you may be able to split your Flexi eGift Card and spend it at different shops! For example, if you have a $30 Flexi eGift Card, you could choose to split it up into a $20 Myer eGift Card and a $10 iTunes eGift Card. 

Where can I spend it?

You can spend your eGift Card at a broad range of Australian retailers. For a full list of our retailers, click here. (page showing full list of retailer logos)

How do I redeem it?

Your Flexi eGift Card will be emailed to you. Click the link in the email to open your Flexi eGift Card.

Then convert your Flexi eGift Card into any combination of gift cards or vouchers up to the total available balance. How you redeem your chosen gift card depends on the card or voucher chosen.

Pay a BPay Bill

What Bills can I pay?

You can pay any bill that has the BPAY logo and Biller Code including credit cards.

Are there any payment limits?

Yes. You can pay a maximum of $1000 per transaction based on regulatory limits. You can however break up a bill into multiple $1000 tranches and enter the same biller and customer reference code.

How does the transaction work?

When you enter the amount you wish to pay, the BPAY biller code and your bill’s customer reference number, you will click through to our checkout.

At checkout, you will be asked to leave your details, which enables us to satisfy our legal requirements under the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017. This sounds ominous, but takes about 2 minutes.

When you proceed to payment, you will be shown the digital currency amount payable and the wallet address to send your digital currency to.

Once you have sent your digital currency to our payment gateway wallet, you will receive an email notifying you that your payment has been received. We then convert your digital currency to AUD and pay your BPAY bill on your behalf.

Are there any fees?

Yes. At checkout you will notice our 3% fee added to your bill amount. This is to help us manage the currency risk of a volatile digital currency market when converting to AUD for us to pay your bill. We use a third party payment gateway to enable the digital currency transaction. Our considerations when choosing a gateway was security, pricing (spread) and speed. You’ll note when at checkout (before proceeding to payment) that the price you receive on your digital currency is very competitive. Other digital currency BPAY facilitators charge up to 6% per transaction on the currency alone, which in our view is akin to highway robbery.


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