How Australians who made a loss on Bitcoin can reduce their tax bill

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Why Australians who made a loss on Bitcoin can reduce this year’s tax bill – but here’s how to avoid a fine

  • Bitcoin investors can reduce their tax bill if they lost money on cryptocurrency
  • The digital currency has dived from $80,000 to $50,000 in only two months 
  • Here are some tax tips for those who bought during height of Bitcoin frenzy 


Australians who bought Bitcoin this year at the height of the cryptocurrency frenzy can reduce their tax bill – but there are penalties for those who try to hide their gains.

Bitcoin surged to $80,000 in early April after American billionaire Elon Musk declared he would accept it as payment for his Tesla electric cars.

Little more than a month later, Bitcoin dived after Musk changed his mind, arguing cryptocurrencies were created by solving complex maths equations, with those computer functions using too many fossil fuels.

Australians who bought Bitcoin this year at the height of the cryptocurrency frenzy can reduce their tax bill - but there are penalties for those who try to hide their gains

Australians who bought Bitcoin this year at the height of the cryptocurrency frenzy can reduce their tax bill – but there are penalties for those who try to hide their gains

Penalties for lying about cryptocurrency

CARELESS: 25 per cent

RECKLESS: 50 per cent

DELIBERATE: 75 per cent

REPEAT OFFENDER: 95 per cent

Source: H&R Block analysis of Australian Taxation Office penalties for failing to declare capital gains

China’s Communist Party government also announced it would ban cryptocurrency transactions.

Since the start of May, Bitcoin has dived from $74,000 to $50,000, leaving investors exposed if they bought amid the hype rather than a year ago when Bitcoin was worth just $13,000.

Existing tax rules allow Australians who make a loss on investments, including shares, to claim that loss against their capital gains but not their taxable income.

H&R Block director of tax communications Mark Chapman said Australians could only claim that loss against the capital gains they made in 2020-21 from selling shares, property or cryptocurrency.

‘If you don’t have capital gains in the same year or you don’t have enough capital gains to use up the loss, you have to carry it forward to later years and use it against the first available capital gain that arises,’ he told Daily Mail Australia.

‘You can’t use the loss against wages/salaries, business profits, rent, or interest and dividends.’

Bitcoin surged to $80,000 in early April after American billionaire Elon Musk declared he would accept it as payment for his Tesla electric cars. Little more than a month later, Bitcoin dived after Musk changed his mind, arguing cryptocurrencies were created by solving complex maths equations, with those computer functions using too many fossil fuels

Bitcoin surged to $80,000 in early April after American billionaire Elon Musk declared he would accept it as payment for his Tesla electric cars. Little more than a month later, Bitcoin dived after Musk changed his mind, arguing cryptocurrencies were created by solving complex maths equations, with those computer functions using too many fossil fuels

Contrary to popular belief, the Australian Taxation Office can trace cryptocurrency transactions.

Phone companies, known legally as Australian Data Service Providers, provide the tax office with cryptocurrency transactions.

Australians who carelessly forget to declare their cryptocurrency transactions face a 25 per cent penalty on the amount they hid from the tax authorities.

Existing tax rules allow Australians who make a loss on investments, including shares, to claim that loss against their capital gains but not their taxable income. H&R Block director of tax communications Mark Chapman said Australians could only claim that loss against the capital gains they made in 2020-21 from selling shares, property or cryptocurrency

Existing tax rules allow Australians who make a loss on investments, including shares, to claim that loss against their capital gains but not their taxable income. H&R Block director of tax communications Mark Chapman said Australians could only claim that loss against the capital gains they made in 2020-21 from selling shares, property or cryptocurrency

Records of crypto transactions that should be kept

Receipts of purchase or transfer of cryptocurrency 

Exchange records

Records of agent, accountants and legal costs 

Digital wallet records and keys 

Software costs related to managing your tax affairs

Source: H&R Block 

This rises to 50 per cent for reckless evasion to 75 per cent for a deliberate offence and 95 per cent for repeat offenders.

Mr Chapman said trying to be too clever with the tax office with cryptocurrency gains was ill advised.

‘I’d have thought that gives some idea why it’s a bad idea,’ he said.

Australians who profit from cryptocurrency also need to be aware they have to pay not just capital gains tax, but also income tax if the ATO considers the gains to be business related.

‘If you are acquiring the cryptocurrency to trade it, you might be deemed to be running a business of trading cryptocurrency, in which case you will pay income tax on the business profits,’ Mr Chapman said.

Unlike the capital gains tax, Australians don’t get a 50 per cent discount on their income tax as the proceeds from cryptocurrency move them into a higher tax bracket. 

Cryptocurrency investors are advised to keep records and receipts of the date of transactions, which can be done via exchange-trading platforms instead of just peer-to-peer transactions.

These exchanges also provide an Australian dollar value of transactions.  

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