Crypto and Tax Time: What You Need to Know for FY25

Cryptocurrency might be digital but your tax obligations around it are very real. Whether you’ve been actively trading, experimenting with DeFi or just dipping your toe in, it’s important to understand how the ATO treats crypto assets and what you need to do when reporting your activity in your FY25 tax return.

The ATO’s data-matching program now pulls information from crypto exchanges, wallet providers and financial institutions so if you’ve been buying, selling or earning crypto, it’s safe to assume they already know. The challenge for many investors is making sense of what’s taxable, what’s not and how to report it correctly.

Our Accounting & Tax team support clients at all levels of cryptocurrency experience, and one thing we know for certain is that crypto tax can get messy quickly. Here’s what you need to be across in FY25.

Most Cryptocurrency Transactions are Taxable

In the eyes of the ATO, cryptocurrency is a capital gains tax (CGT) asset, which means any profit made from selling, swapping or spending it could be taxable. CGT applies to more than just selling for Australian dollars. You also need to report gains or losses when you:

• Trade one token for another (e.g. Bitcoin to Ethereum)
• Use crypto to purchase goods or services
• Transfer assets in a way that changes ownership
• Gift crypto to someone else
• Wrap or unwrap tokens in certain cases

Selling your crypto for more than you originally paid results in a capital gain, which may be taxable. If you dispose of crypto for less than what it cost you to acquire, the difference may be recorded as a capital loss, and if you’ve held the asset for more than 12 months, you might be entitled to a 50% CGT discount, depending on how your activity is classified.

Earning Crypto? That’s Income

Many investors now earn crypto rather than just buying and selling it. This includes:

• Staking rewards
• Airdrops
• Yield farming or DeFi interest
• Referral or incentive tokens

In most cases, this type of income must be declared at its value in Australian dollars at the time it was received.

Later, if you sell or swap that cryptocurrency, you may also trigger a CGT event. That’s two separate taxing points, which often surprises people.

Are You an Investor or a Trader?

The way your crypto is taxed may change depending on whether you’re considered an investor or trader. Most individuals fall under the investor category, with CGT rules applying.

However, if you’re trading frequently, operating in a business-like manner or using structured methods to buy and sell, you may be taxed on revenue account. In that case, your profits are treated as business income rather than capital gains.

If you’re unsure where you sit, it’s important to get advice early. The distinction can significantly impact your tax outcome.

Advanced Cryptocurrency Transactions

The crypto space evolves quickly, and some activity doesn’t fall neatly into the usual ‘buy and sell’ categories. Even if you’re not realising cash gains, you could still be triggering tax obligations.

Forks, Burns and Wrapping Tokens

Events like chain splits (forks), token burns, and wrapping/unwrapping tokens (e.g. ETH to wETH, which creates a blockchain-compatible version of the original) may affect your tax position. Forks typically aren’t taxable until disposal, while wrapping may count as a CGT event depending on the structure of the transaction.

Liquidity Pools and DeFi Complexity

Providing or removing liquidity on DeFi platforms may also trigger a disposal, even though you’re staying within the crypto ecosystem. DeFi (short for decentralised finance) refers to blockchain-based platforms that let users lend, borrow or earn rewards directly, without banks or intermediaries. These protocols often reward users with fees or new tokens, which can be taxable as income or capital gains.

These rules are still developing and are open to interpretation, so if you’ve engaged in any complex DeFi protocols, it’s worth getting tailored advice.

Lost or Stolen Cryptocurrency Isn’t Automatically a Write-Off

Scams, lost private keys and collapsed exchanges are unfortunately common. You might be able to claim a capital loss in some of these cases but the ATO won’t accept it without solid documentation:

• You owned the cryptocurrency
• You’ve lost access permanently
• There’s no reasonable prospect of recovery
• The wallet or platform was under your control

In cases like the FTX collapse, where a major crypto exchange went bankrupt in 2022 and froze client funds, you may only be able to claim a loss once the administration process is finalised. You’ll need to provide documents like platform emails or official reports to support your claim.

What About Personal Use Crypto?

Using crypto for personal spending (like buying a coffee or a flight) may fall under a CGT exemption, though the rules are quite strict. The personal use exemption is only likely to apply if:

• You bought the crypto intending to use it straight away, not holding it as an investment.
• You actually spent it on a personal item or service not long after buying it.
• The total value involved was relatively low (generally under $10,000).

If you’re holding cryptocurrency as an investment, trading regularly or using it in DeFi (as most people are) the exemption likely won’t apply.

Record-Keeping is Critical

Regardless of how simple or complex your crypto activity has been, you must keep detailed records to support your tax return. This includes:

• Dates and times of transactions
• Asset type and quantity
• AUD value at time of transaction
• Purpose (buy, sell, earn, transfer, etc.)
• Wallet addresses and platform details
• Include any transaction fees or network costs (commonly known as gas fees) that were incurred when moving or trading crypto.

You’ll need to hang onto your records for a minimum of five years in case the ATO asks for evidence down the track. Exchange-generated reports can sometimes miss crucial information, so it’s wise to export data directly from your wallets to maintain complete and accurate records.

Common Issues in Cryptocurrency Tax

Some of the most frequent cryptocurrency tax issues we see include:

• Misreporting crypto-to-crypto swaps as non-taxable
• Forgetting to declare staking or airdrop income
• Assuming the ATO can’t trace wallet activity
• Lodging based on incomplete exchange summaries
• Not properly documenting SMSF crypto transactions

These mistakes are understandable but they can be costly if left unchecked.

New To Crypto? Start Clean

If you’ve only made a few crypto purchases this year, now’s the best time to set up your systems properly. Clear record-keeping, a basic tracking tool and early awareness of your obligations will save you stress later, especially if your trading activity grows in future years.

Crypto Tax Doesn’t Have To Be Overwhelming

There’s no denying that cryptocurrency tax can be complex but it doesn’t need to be a source of anxiety. Whether you’re a first-time investor, seasoned trader or managing digital assets through an SMSF, our tax accountants can help you make sense of the rules and report with confidence.

We’ve helped clients navigate a wide range of crypto questions, from everyday investing to more complex scenarios. And we’ll work with you to get it right, calmly, clearly and without the chaos.

Need Help with your cryptocurrency tax return?

Whether you’re lodging your FY25 return or planning ahead, reach out to your Carbon accountant or contact our team to get started.