Simplifying Crypto Tax in Australia: What You Need to Know

Investigate the growing trend of offering cryptocurrency as employee compensation and the associated “crypto tax in Australia” implications for employers and employees.

All-Inclusive Guides on Cryptocurrency in Australia

In this blog post, some guides have been compiled that may help with current rules applied to cryptocurrency in Australia. This guide contains only the latest and general information; professional finance advisors or legal advisers have not authored it. For specific advice, professional guidance should be sought.

Cryptocurrency has become a popular investment in Australia, leading to specific tax obligations. When you make a capital gain from selling crypto, it must be reported. The Australian Taxation Office has clear regulations regarding crypto transactions. Crypto investors need to pay attention to their net capital gain calculations.

Using a crypto tax calculator can simplify this process. Tax software designed for cryptocurrency can assist in ensuring compliance. If you receive cryptocurrency or engage in cryptocurrency transactions, understanding the tax implications is crucial. Consulting a tax professional can help in navigating these complexities.

The Trend of Paying Crypto Currency as Employee Compensation

In the 2022 survey, it was reported that the Australian public owns 25% of respondents of Crypto. Furthermore, Australian exchequer commitments help in regulatory approaches. It provides a crypto-friendly status through prioritising fostering. Therefore, we grow all across the Australian policymakers they are initiating to encourage crypto-based projects. This may attract global attention and enable developers to consider blockchain space operating in Australia.

In addition, promoting the blockchain and accepting new technologies are available across industries. Interestingly, the Australian government is working on a clear framework that will provide mechanics for crypto taxation. Some of the top crypto tax in Australia, its implications and trends are as follows:

Top Trends
1	Employee Benefits	A company can offer crypto as innovation & take significant advantage of the brand which has forward thinking.
2	Attracting Talent	Employees might observe crypto currency benefits that attract as well as retain talents. Especially in the finance and tech sectors, it has high demand for crypto expertise and blockchain.
3	Company Innovation	Employees might observe crypto currency benefits that attract as well as retain talents. Especially in finance and tech sectors, it has high demand for crypto expertise and blockchain.

What is the method of crypto tax in Australia?

The Australian government classifies crypto assets as property. All profits and losses from these assets are subject to capital gains tax. Tax implications must be considered when reporting crypto trades. Any capital gains need to pay tax, while losses offset gains. Accurate tax calculation is crucial, and automated crypto tax software can help manage tax liability. The Australian Taxation Office provides guidance on lodging your own tax return. Properly reporting CGT on crypto ensures compliance with tax laws. Use crypto responsibly and ensure you know how much tax you’ll pay on crypto investments. However, some events may trigger capital gain in taxes, such as:

• Gifting Crypto
• Selling Crypto
• Trading Crypto
• Services with Crypto or goods with Crypto

Crypto profit indicates capital gain, considered part of income tax. The total earned capital gains are collected annually and merged into other incomes. Thus, it will add up to the total tax liability of an individual.  

Income Tax Rates for Australian Residents in 2023-2024

Threshold of Income	Rates	Payable Tax on Income
$0 – $18,200	0%	Nil
$18,201 – $45,000	19%	19c on $1 up to $18,200
$45,001 – $120,000	32.5%	$5,092+ 32.5c on $1 up to $45,000
$120,000 – $180,000	37%	$29,467+ 37c on $1 up to $120,000
$180,001 and above	45%	$51,667+ 45c on $1 up to $180,000

The government ensures accurate reporting of Australia’s crypto tax and transaction records. These records include all types of crypto receipts, sales, transfers, or trades, ensuring the correct dates and timing of transactions. For taxation purposes, convert transactions into Australian dollars based on the market value at that time. Do not overlook the importance of reporting on each crypto transaction. Therefore, Australia’s government has implemented a crypto asset data-matching program, confirming and reporting every crypto tax return.

“Most investors are involved in buying or selling cryptocurrency in Australia. If an individual engages in buying or selling cryptocurrency as a business, the trader status will apply. The outlined tax rates determine the crypto tax traders must pay. Any capital gains tax discount on cryptocurrency held for over one year is not available to them. Fortunately, traders can offset their crypto capital losses and relevant expenses,” shares Moulik Jain from CaptainBiz.

The Associated Tax Implications for both Employers and Employees in Australia:

Tax Implications for Employers	Tax Implications for Employees
Fringe Benefits Tax (FBT) -Non-Cash Benefits -Valuation	Income Tax -Fair Market Value -Subsequent Gains or Losses
Payroll Tax	Capital Gain Tax (CGT) -Holding Period -Reporting Requirements
Record-Keeping	Compliance

Regulatory Considerations:

The Australian Tax Office (ATO) has announced guidelines for crypto tax in Australia, clarifying that cryptocurrency is subject to capital gains tax (CGT) and treated as property. Employees and employers must stay aware of any changes in tax law and regulations to ensure compliance with the latest requirements.

Challenges:

• Volatility: The fluctuating nature of cryptocurrency can complicate determining fair market value, affecting tax liability. Once payments are made, market values can lead to accurate tax liabilities based on their increased value.
• Advisory Services: Professional advice is essential for both groups to manage tax implications and ensure compliance. Guidance from registered tax advisors helps you navigate tax obligations effectively.
• Technology and Security: Systems for cryptocurrency transactions require robust security measures to protect against hacking and fraud. Implementing secure crypto tax software can enhance the accuracy and security of tax reporting.

Rewarding Salaries to Workforce in Crypto Currency

“When rewarding salaries to the workforce in cryptocurrency, Australian companies must consider several factors. Salary sacrifice agreements must be formed between employees and employers, including crypto assets. This agreement represents an alternative form of compensation with added benefits. If the value of the cryptocurrency decreases, this arrangement will provide fringe benefits,” shares Leon Duncan from QB Techs.

Employers are responsible for paying crypto tax in Australia for any employee remuneration through these fringe benefits. To calculate Fringe Benefits Tax (FBT), determine the taxable values of all benefits given to employees. Gross up these values to calculate the amount before applying tax. Consequently, a high tax rate applies to these benefits.

The company must gross the value to determine FBT and pay 47%, representing the tax benefits the company owner needs to contribute to the government.

If no salary sacrifice agreement is established, the payment will be in cryptocurrency for tax purposes. Receiving their average wages and salaries is considered in this case. Employers must submit regular tax withholding and apply regular obligations. The Australian dollar value of paid cryptocurrency must be considered. Pay As You Go (PAYG) withholdings vary depending on contractor and employee reimbursement.

Cryptocurrency as payroll

Initially, let’s set a level that will help everyone be on the same page. “Paying cryptocurrency as payroll to their Employees is meant to be in digital currency. This includes Ethereum, Lite Coin, and Bitcoin. Therefore, cryptocurrencies are considered digital assets that handle blockchain technology. They also allow us to improve our privileges and enhance regulatory compliance against different entities all across the world,” shares Taimour Zaman from AltFunds Global.

This payment process is gaining demand in businesses because of its fast transaction timing and low transaction fees compared to common payroll methods. This method of cryptocurrency payroll allows businesses to reduce the cost associated with regular payroll systems and introduce new ways for employees to receive their earnings.

However, this process involves simple calculations of employees’ earnings and sending them cryptocurrency through digital wallets. Later, Employees can convert the cryptocurrency into paper currency or leave it as digital assets. This is a relatively new approach, so some businesses consider using cryptocurrency as a feasible option for their payroll methods.

Fiat currencies do not have physical commodities like silver and gold; however, they need necessary value from the government or law. This type of currency is used in most countries, such as the Euro, Japanese Yen, US Dollar, etc. Thus, fiat currency is managed through the country’s central bank, which has complete control of its supply. They circulate this money and act accordingly in their monetary policy.

Advantages of Paying Crypto Currency to Employees

Despite obstacles while using cryptocurrency to pay employees salaries, there are growing chances of declaration. Indeed, these processes have several advantages for employees and employers. A few key advantages are:

1. Saying “yes” to Employee requests: The number of employees who want the option of getting paid with cryptocurrency is increasing. Many are converting their currencies into their feasible choice of cryptocurrencies.
2. Global and Decentralised: Decentralising cryptocurrency while operating it on the worldwide network. This makes it easier to pay in different places without dealing with complex currency exchanges.
3. Low Transaction Fees: Cryptocurrency transactions normally contain low transaction fees whereas traditional methods do not offer this feature.   
4. Zero Charge: Cryptocurrency has no option to charge back; it is permanent. This reduces any risks of scams or fraud and establishes non-refundable final payments.   
5. New Technology: Giving employees payment through crypto currency also encourages the latest technology. Even though it makes a company more attractive, employees who are interested in working with a forward-thinking company will be interested.    
6. Secure & Fast: “Cryptocurrencies are easy to use and more secure than traditional payment processes like checks or bank transfers. Transactions are instantly made, reducing cost and time,” shares Jeremy Biberdorf from Modest Money.

However, paying with cryptocurrency has various advantages that save money and time. These include benefits like reducing fraud activities, not being charged back, and introducing new technologies. Thus, employers and employees must consider all the challenges and risks related to cryptocurrency.

Are you an investor or trader?

Firstly, identify whether you are classified as an investor or trader in the Australian Taxation Office ATO.

Investor:

Investors trade cryptocurrencies. They use personal investment tools to buy or sell cryptocurrencies. Sometimes, they borrow their total income from stakes, forks, long-term capital gains, and airdrops. A vast range of people engage in cryptocurrencies, and their transactions are subject to Capital Gain Tax (CGT).

Trader:   

Traders run businesses as a primary source of income through buying and selling these cryptocurrencies. Traders usually use their profits as business income rather than assessing these transactions as a capital gain. However, being a trader is more than not just about trading volumes or frequencies. It acquires more actions on your behalf, like implicitly and explicitly suggesting, looking for a trader as a business, and assessing ATO on the same effects.

Capital Gains Tax (CGT)

The Australian Taxation Office ATO analyses digital currency as an asset, as a share in a business or a property. This indicates that one must have assessed their capital gain on every trade transaction, sale, or giving crypto. Furthermore, different kinds of Capital gain events are as follows:

Capital Gains:

Any gain in profit transactions will need to pay some tax from your capital gain. Likewise, when a person buys a Bitcoin for $7,000, it is considered as their cost basis. Later, he sold it for $10,000, which meant he gained $3000 as a capital gain; therefore, he had to pay tax on this amount.

Long-Term Discounts on Capital Gain Tax:

The Australian Government chooses you for a long-term CGT discount if you have yet to trade on different shares and cryptocurrencies all day. The essential thing to understand is that if you hold assets for more than 12 months, you must pay the following tax on the capital gain. It will be deducted from your capital losses.

• 50% on resident entities along with partners in partnerships.
• A 50% discount is for reducing or removing capital gain made after 8 May 2012 as foreign residents.
• 33.33% on approved super funds and other life insurance groups.

Taking the above examples, if you are an Australian resident and bought Bitcoin for $ 7,000, Later on, after one year, you sell it for $ 10,000. The capital gain will be treated as $1,500 as a substitute of $ 3,000; it means you have no capital loss here. Similarly, if you have a $10,000 capital loss, your capital gain would be $1000 instead of $2,000.  

Capital Loss:

Consequently, on the other hand, cryptocurrency will be worth less if you sell it immediately after buying; you will create a capital loss. For instance, if a person buys a Bitcoin for $7,000 and sells it after a few months for $ 4,000, this person has created a capital loss of $3,000. Thus, Capital loss happens in the same financial year or subsequent financial years. Here is another example: if a person built $5,000 as a capital gain on any trade transaction during a capital loss on any other trade. In the sure scenario, the overall capital gain will be $2,000 because of partial offsets in some other capital gains.

Although no limits are applied on how long the capital loss is forwarded, using that subsequent year’s capital gain is necessary. Capital loss is not used for your earned income. 

Net Capital Gains:

When it’s time to calculate the net capital gain, ATO never separates various types of assets. Therefore, profits are selling shares, crypto, other assets, or properties combined altogether.

Formula:

(Entire Capital Gains – Entire Capital Losses) x Capital Gains Discount    = Net Capital Gains

                                             (Previous years)     (On assets taken over a year)

 Are you a Proper Trader?

In this question, it is hard to determine whether you are a proper trader. This is because more than a small quantity of cryptocurrency trading is needed to be a trader before ATO. Owning and operating a business is essential; however, we need a proper definition of what constitutes business it should be. Some considerations are below:

• Focus on short-term profit generation rather than long-term investments.
• Weekly or daily transactions occur repetitively and in high volumes.
• Buying or selling attitudes may suggest operating trade strategies.
• Operating a business includes office space, strategy documents, business registrations, planning, asset selections, budgeting, and record keeping.
• If you are eligible for most of the above points, you will likely have an easy chance of operating a trader position. If you are still trying to decide, consider suggestions from a specialist.

Can I be an investor while being a trader?   

The brief If you wish to handle both investing and trading accounts, you may do so.  Despite this, you will need separate wallets for both transactions to keep minimum cross-contamination between both wallets. Thus, it indicates that it is possible to be a stock investor while trading cryptocurrency in Australia and vice versa.

Advantages of Cryptocurrency Trader:

A Cryptocurrency trader has access to several tax-related benefits for small businesses. It may include:

• Small Business Tax: “The benefits in Australia change yearly depending on numerous factors. Generally, they offer tax offsets of $1,000 and even reduce rates for some small-scale businesses,” shares Peter Brooke from HealthPlusLife.
• Loss Rules: Crypto Traders who quickly generate above $20,000 while trading but get a loss in the overall transaction. They may claim a rest in their tax income and provide a chance to claim a trading loss on their regular salaries.  
• Expenditures: These include all types of business and crypto-related expenses, like software, hardware, trading fees, and other subscriptions. These expenses are claimable as deductions, while the trader may have access to a $30,000 instant business asset.

Disadvantages of Cryptocurrency Trader:

• Increase ATO Surveillance: While giving various tax concessions, ATO also has interests in your every step and activity during trading.
• Extra Admin: As a trader, you may have compliance requirements and complex record-keeping that may consume your time and money.  
• Long-term Capital Gain Discount: It offers a 50% discount, which is considered as not having any long-term Capital gains Discount because it does not make any considerable impact.

Forthcoming and Margin Trading

Both activities are referred to as trading despite the treatment of ATO. When trade happens, It depends on whether you are working as a trader or an investor. Likewise, if you act like an investor, traders will treat you as your target of buying and selling the crypto. This may trigger CGT on the total amount of trading. For example, if you hold $100 with 10x leverage for a long-term position on BTC, ATO may notice $1000 as a BTC purchase. Later on, if that particular position is closed for a $200 profit, then this amount can be reported as Capital Gain.

While entrancing in forthcoming and margin trading is not the cause of becoming a trader, there is something that ATO will assess. They will determine your position as an investor or a trader. If you are a person who is mining coins just as a hobby, the rules are the same. Any coins you get from mining will be treated as a new asset. Thus, selling or trading these coins will gain capital per total amount received in Australian dollars.         

Conclusion

The bottom line is that this growing cryptocurrency trend is becoming a part of employee compensation. Whether you are an employee or not getting associated with tax implications is becoming important for both of them in Australia. The government is responsible for keeping Australia’s crypto tax in Australia and transaction records. These records include all types of crypto receipts, sold, transferred, or trade receipts, to ensure the dates and timing of transactions. Paying your employees in cryptocurrency may result in a new pay method that can work perfectly. But it may involve some risks or challenges, too. The company should accurately calculate complexity, volatility, security risks, regulatory implications, or legal implications before arranging such systems.