Crypto and NFT’s have become extremely popular in recent times. Due to this, the ATO has taken action to ensure that crypto and NFT transactions are recorded properly. You may not realise that you are creating capital gains events in the course of your crypto and NFT trading. Here’s a few transactions that will cause a capital gains event:
- Transferring one coin for another coin: If you transfer one coin to another, you trigger a capital gains event. The value of the coin at the time of trade represents the consideration received.
- Purchasing an NFT with Crypto: If you purchase an NFT with crypto that has been used as an investment, then you will declare a capital gain on the increase in value of the coin when it is traded.
- Losing cryptocurrency: Stolen or lost crypto will cause a capital loss. You do have to provide sufficient evidence that it truly has been lost or stolen in order to claim the capital loss.
There are a few instances where crypto and NFT’s do not cause a CGT event:
- When coin is moved from one wallet to another, but has not physically changed state. For example, transferring your etherium from one wallet to another.
- Crypto used for personal transactions. For example, you can only purchase a piece of clothing with crypto, so you transfer money into crypto to pay for the clothes. One key indicator that crypto is a private use asset is that the time you hold the crypto for is minimal.
- An NFT is purely for entertainment only. If an NFT is not intended to resell at a higher value, and is purely for the entertainment of the person who owns it, then there are no capital gains events for the NFT.
Don’t get caught at tax time with an unexpected tax liability. Keep an eye on your crypto transactions and understand how each transaction affects you tax wise.
We are getting on top of crypto and tax, and can happily assist you with your crypto in your tax return. Message us for more info.