From Australian citizens to policymakers, crypto’s enthusiastic adoption has been widespread. In a 2022 survey of the Australian public, 25% of respondents reported owning crypto.
The Australian Treasury has emphasized their commitment to a regulatory approach that prioritizes fostering a crypto-friendly environment. This has been seen across policymaker’s initiatives to encourage the growth of Australian-based crypto projects and to attract global developers in the blockchain space to base their operations out of Australia.
In promoting the acceptance of blockchain technologies across industries, the Australian government has laid out a clear framework for the mechanics of crypto’s taxation.
How is Crypto Taxed in Australia?
The Australian government has classified crypto assets as property and any profits or losses made on them as capital gains or capital losses. The disposal, exchange or trade resulting in a capital gain or loss must be reported for tax purposes.
For any capital gains earned, taxes will be owed on the profit, while capital losses can be used to offset gains. The Australian government conveniently offers a calculator and record keeping tool to ensure that taxes are accurately determined.
Events that Trigger Capital Gains Taxes:
- Selling crypto
- Gifting crypto
- Trading crypto
- Paying for goods or services with crypto
As a note, even though profits made on crypto are referred to as capital gains, they are considered part of one’s income tax and, as such, are not taxed separately. The total capital gains earned annually will be combined with all other forms of income and added up to calculate one’s total tax liability.
Individual Income Tax Rates:
- 0-$18,200: 0%
- $18,201-$45,000: 19c for each $1 over $18,200
- $45,001-$120,000: $5,092 plus 32.5c for every $1 over $45,000
- $120,001-$180,000: $29,467 plus 37c for every $1 over $120,000
- $180,001 and over: $51,667 plus 45c for every $1 over 180,000
The Australian government requires close record keeping with respect to crypto transactions. This includes receipts for crypto that is bought, transferred, sold, or traded with the date and time of each transaction included. For reporting purposes, each transaction will need to be converted into the fair market value in Australian dollars at the time it occurred.
The importance of reporting all crypto transactions cannot be overlooked because Australia has a crypto asset data-matching program which cross checks the transactions reported on one’s tax return with those executed through service providers.
Personal Use Assets
In certain scenarios, crypto can fall under the Australian government’s definition of a personal use asset, which is an asset that is acquired and used mainly for personal use or consumption.
This categorization primarily pertains to crypto assets that are acquired and promptly utilized as a method of payment for personal consumption, such as purchasing goods or services.
An example of when crypto qualifies as a personal use asset could be in the case of crypto that is purchased and immediately used to pay for an event ticket. In this scenario, the crypto bought and subsequently used as remuneration for a good would be considered a personal use asset and thus exempt from capital gains taxes.
It is important to note that crypto held as an investment asset, even if for personal purposes, is not a personal use asset.
Paying your Workforce in Crypto
When an employee’s salary or wages are paid in crypto rather than in Australian dollars, a salary sacrifice arrangement must be made between employer and employee with crypto assets representing a fringe benefit.
The salary sacrifice confirms that all parties are in agreement with the alternate form of remuneration, which, in the case of crypto, falls under the classification of a fringe benefit.
The employer is held responsible for paying taxes related to employee remuneration in fringe benefits. When calculating what is owed in Fringe Benefits Tax (FBT) a company must first determine the taxable value of the benefits an employee has been given. This value is then “grossed-up” to calculate the amount of money the employee would need to earn before taxes to afford these benefits themselves, at the highest tax rate.
Once the “grossed-up” value has been determined, a company must pay 47% of it as FBT. The 47% represents the tax on the benefits that the employer is required to contribute to the government.
In a scenario where a salary sacrifice agreement has not been pre-established, an employee receiving payment in crypto is, for tax purposes, considered to have received their normal salary or wages.
For an employer, this looks like fulfilling regular tax withholding and superannuation obligations based on the Australian dollar value of the crypto paid to the employee. These Pay as You Go withholdings (PAYG) will vary depending on if remuneration is being issued to a contractor or an employee.
Crypto Payroll and Compliance with Rise
Australia's commitment to regulatory clarity and its active interest in nurturing advancements within the blockchain industry position it as an ideal hub for crypto projects. For companies based out of or hiring within Australia, Rise is an all-in-one solution for crypto payroll and compliance.
From compliant contractor and employee onboarding to crypto and fiat payments, Rise streamlines the hiring and payroll processes. Verify identity and generate professional service agreements in minutes, set up 1 click mass payouts, and unlock next-level freedom for talent to receive payments in their preferred currency.
Rise's innovative flexible routing system enables companies to fund payroll in the currency of their choice, while contractors and employees can receive their payouts in their preferred currency. This means a company can fund payroll using crypto held in a digital wallet, while contractors or employees have the option to withdraw their payouts in fiat to a traditional bank account, or vice versa.
Schedule a demo today to learn more about how Rise’s payroll and compliance solution can scale your global workforce.
