INTHEBLACK July/August 2023 - Magazine - Page 46
AT A GLANCE
The number of accountants
not asking their clients if they
have transacted in crypto has
increased, according to the
Australian Taxation Office.
The recent cryptocurrency
collapse wiped out about
US$2 trillion (A$2.98 trillion)
in crypto assets and is likely
to affect tax returns.
When purchased as an
investment, crypto is subject
to capital gains tax. Crypto
losses are treated like other
capital losses, such as shares.
PUBLIC PRACTICE
How to calculate
crypto losses
in Australia
The crypto market has always been volatile, but come tax time this
year, accountants should be ready to report on a flood of crypto losses.
Story Mark Phillips
46 INTHEBLACK July/August 2023
Last year was brutal for the crypto
market. It lost more than US$2 trillion
(A$2.98 trillion) overall, according to
the World Economic Forum. The value
of Bitcoin fell by more than 60 per cent –
and it was not even the worst performer.
In May 2022, the collapse of the
US$26 billion (A$38.7 billion) stablecoin
Terra, and the associated LUNA crypto
network, sent shockwaves through the market.
In December, Core Scientific, one of
the largest publicly traded crypto mining
companies in the US, filed for bankruptcy.
At around the same time, crypto
trading platform FTX – once valued at
US$32 billion (A$47.6 billion) – imploded.
Considering this complex environment,
accountants should prepare themselves
to report on crypto losses to the Australian
Taxation Office (ATO) at tax time this year.
It is worth noting that, because these
issues will affect clients globally, revenue
authorities in many jurisdictions are
likely to examine them closely.
CALCULATING CRYPTO LOSSES
In Australia, crypto losses are treated the
same as other capital losses, such as shares,
says Andrew Allemand ASA, insolvency
expert at Brisbane-based SV Partners.
With crypto assets, capital gains tax (CGT)
events occur when it is sold, gifted, traded,
exchanged or swapped, converted
to fiat currency, or used to purchase goods
or services. The same applies in the event
of destruction, or the loss or creation
of contractual or other rights.
As the ATO notes, when crypto is purchased
as an investment – its most common use – it is
subject to CGT upon realisation.
All these CGT events result in either
a capital gain or capital loss. Capital losses
can be applied against other capital gains,
but they cannot be deducted against
other income.
If the crypto asset has been held for
at least 12 months, individuals may be
able to apply the 50 per cent CGT
discount when calculating their gains.
