Are you looking to gift crypto and wondering about taxes? In many countries, gifting crypto is tax-free under certain thresholds, which keeps things simple for taxpayers. However, in Australia, crypto gifts are not as straightforward.
This week, we cover the tax implications of gifting cryptocurrency in Australia to help you become completely tax compliant.
Do you pay taxes on crypto gifts?
In Australia, gifting cryptocurrency is taxed the same way as selling cryptocurrency. Both operations are considered a disposal by the ATO and result in a capital gains tax event.
As per selling cryptocurrency, the capital gain is calculated as the difference between the cost base (what you paid for it in AUD) and the sale proceeds (the Fair Market Value at the time you gift it).
Capital gains tax on cryptocurrency in Australia
According to the ATO, gifting crypto will lead to capital gains taxes in Australia. Let’s look at an example:
John bought 1 ETH at AUD 1,000 in February 2021.
In December 2021, John wanted to gift 0.5 ETH to his friend.
At that time (Dec. 2021), 0.5 ETH is worth AUD 2,000. In February 2021, 0.5 ETH was worth AUD 500.
When John gifts the 0.5 ETH, he’ll have a capital gain of AUD 1,500 (AUD 2,000- AUD 500).
At the end of the financial year 2022, John will report this gift, and if he has an overall profit from crypto trading during 2021, he’ll have to pay capital gains taxes.
How is receiving crypto as a gift taxed?
Receiving crypto as a gift in Australia is not a taxable event. As a result, you do not have any extra tax reporting requirements. The only thing you need is a wallet to receive the crypto.
However, a capital gains tax event is triggered when you later sell this crypto. Luckily, you are only taxed on the difference between the Fair Market Value when you receive the cryptocurrency and the sale proceeds, rather than what you paid for it (which would be zero). If you have a profit from the sale, you may have to pay capital gains taxes.
Is transferring crypto a taxable event?
Transferring crypto between personal wallets is not a taxable event in Australia. There’s a distinction between sending your crypto between personal wallets (e.g., hot, cold, paper) and sending it to another person’s wallet. The second scenario would be considered a disposal and therefore be subject to CGT.
You can send your crypto as many times as you wish, between wallets that you own, without incurring a taxable event. Learn more about transferring crypto between wallets and taxes in Australia.
Do you pay taxes on crypto if you don't sell?
As an investor, you do not have any tax obligations from simply holding cryptocurrency in a wallet. You are only taxed upon disposal. It is important to note that there are ways to dispose of cryptocurrency and incur in taxes that do not involve selling it (e.g., gifting the currency, spending it, etc.).
How to report crypto gifts in your taxes?
Gifting cryptocurrency is a disposal, which means you calculate the CGT when you gift it, the same as any other cryptocurrency trade. CoinTracking automatically tracks the Fair Market Value (in AUD) of all your crypto gifts to ensure you can calculate your capital gains with ease.
Do you have to pay tax on crypto gifts in Australia?
Yes. Become tax compliant with crypto gifts by:
Assessing the Fair Market Value in AUD of all your crypto gifts.
Calculate your capital gains on each crypto gift.
Report your gifts and pay the appropriate capital gains taxes.
Learn how to import your crypto gifts into coinTracking:
The best crypto tax calculator in Australia: CoinTracking
CoinTracking can then help you take care of all the crypto tax reporting requirements beyond crypto salaries:
25+ advanced reports, including which coins offer you a tax-free rate.
Automatic capital gains with 12 accounting methods (e.g., FIFO, LIFO, HMRC, ACB).
Generate complete and compliant tax reports.
Do you have any crypto tax questions? Check Full Service Australia
Cryptocate, CoinTracking’s Australian Full Service Partner and premier Australian crypto tax firm, offers a range of services to assist with your cryptocurrency reporting. If you need help to report airdrops or other cryptocurrency income, Cryptocate specializes in creating cryptocurrency income and capital gains reports to ensure tax compliance. Talk to an expert from Cryptocate today by submitting a form on our Full Service page!
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*This post is a part of our educational series about crypto taxes in Australia, with the support and review of expert accountants from Cryptocate, the CT Full Service provider for Australia.
Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.