When you sell an asset that is subject to capital gains tax (CGT), it is called a CGT event. This is the point at which you make a capital gain or loss.
There are other CGT events, such as the loss or destruction of an asset, or creating contractual or other rights.
The type of CGT event that applies to your situation may affect:
• The time when the CGT event happens
• How to calculate your capital gain or loss.
CGT what you pay tax on
When you sell an asset for more than it cost you, you have a capital gain.
When you sell an asset for less than it cost you, you have a capital loss.
You are required to pay tax on your net capital gains. This is calculated using:
- your total capital gains
- less any capital losses
- less any discount you are entitled to on your gains.
There is a capital gains tax (CGT) discount of 50% for Australian individuals who own an asset for 12 months or more. This means you pay tax on only half the net capital gain on that asset.
Transacting with cryptocurrency
A capital gains tax (CGT) event occurs when you dispose of your cryptocurrency. A disposal can occur when you:
- Sell or gift cryptocurrency;
- Trade or exchange cryptocurrency (including the disposal of one cryptocurrency for another cryptocurrency);
- Convert cryptocurrency to fiat currency (a currency established by government regulation or law ), such as Australian dollars, or
- Use cryptocurrency to obtain goods or services.
If you make a capital gain on the disposal of cryptocurrency, some or all of the gain may be taxed. Certain capital gains or losses from disposing of a cryptocurrency that is a personal use asset are disregarded.
If the disposal is part of a business you carry on, the profits you make on disposal will be assessable as ordinary income and not as a capital gain.
While a digital wallet can contain different types of cryptocurrencies, each cryptocurrency is a separate CGT asset.