Did you witness a crypto loss this year? Are you confused about whether you can claim a crypto loss or not? The ATO has released the updated information on when you can and cannot claim a crypto loss or gain in your tax return.

Before getting to a straight conclusion, the first thing to remember is that gains and losses from cryptocurrencies can only be declared in your tax return when you dispose them off. This means, it can only be reported when you sell a crypto currency, exchange it for other assets, convert it to other currency, and buy anything with it.

You cannot acknowledge market fluctuations or claim a loss because the value of your crypto assets got altered, unless the loss is realised or crystallised. The tax return of a particular year in which the cryptocurrency was disposed should include any gains or losses.

In case, you kept the cryptocurrency as an investment for more than a year and made a capital gain, you may be eligible for the 50% Capital Gains Tax (CGT) discount. This will reduce your tax liability by up to half.

Also, if you incurred a capital loss when selling a cryptocurrency, you can apply that loss to any potential capital gains. This is only possible if the crypto is a personal use asset.

When it comes to capital gain, you can only use a capital loss offset to a capital gain. But, you cannot compare any capital loss to other sources of income like salaries and earnings. You can consider keeping the losses and carry them forward for future use if you don’t have any capital gains to offset them.

To avoid any discrepancies, you must include any cryptocurrency-related earnings in your tax return, such as airdrops and staking rewards. In order to ensure efficiency at every step, don’t forget to document or record all your cryptocurrency transactions with no error.

The ATO is heavily focused on cryptocurrency reporting and has sophisticated data matching tools in place to catch any discrepancy or error.

Since cryptocurrency is complex, tax related to it is not at all easy. If you are worried about whether you can claim it in your tax return or not, feel free to consult our qualified tax accountants at KPG Taxation. We stand by you at every step of the taxation process.