One third of Aussie investors are still in the dark about key tax detail: report

News.com.au

7 hours ago

An estimated 1.5 million Aussies are in the dark about a potentially crippling tax-time blunder, according to new research into the habits of cryptocurrency investors Down Under.
Cryptocurrency began as a niche experiment that saw early adopters scorned by traditional economists. Fast-forward to today and it's become an extremely popular cornerstone of modern portfolios, largely fuelled by recent meteoric rises, meme-fuelled bull runs and highly publicised billion-dollar NFT frenzies.
An estimated six million Australians now own crypto in some form or another, but an alarming amount still don't understand that it's largely moved on from its original spot in the shadows.
The taxman, as always, has caught up.
According to a University of Queensland study of 745 coin holders, a full third of Australian crypto investors either don't know or aren't sure that their gains are taxable.
That means roughly one in three of Australia's estimated 4.5 million crypto investors could be caught off guard when the Australian Taxation Office (ATO) comes knocking.
'Australians may not be fully aware of the potential tax consequences and may experience adverse events, which leave them financially vulnerable,' the study reads.
According to the study, it's not just tech novices or first-time investors falling into the trap. Of those who admitted they were unaware that crypto profits could be taxed, nearly half (49 per cent) had tertiary level qualifications.
Women made up nearly two-thirds (64.5 per cent) of those who were unsure or unaware.
The research arrives on the back of a volatile few years in crypto. After the infamous 2022 crash wiped hundreds of billions from the global market, a 2024 rebound has refuelled the optimism.
For Aussies, the ATO is not casting a kind eye on those who fail to appropriately declare all their gains in recent surge.
'Ignorance is no excuse, I'm afraid,' Australian crypto analyst Sydel Sierra said in a report provided to news.com.au.
'I, myself, copped a whopping big tax bill when I first made a profit on my crypto, so I know what it's like.'
The ATO treats cryptocurrency as a personal asset, not a currency. That means capital gains tax applies when it's sold for a profit, just like regular shares or property.
'This is obvious, but you need to budget for that, you could be up for hundreds of thousands of dollars,' Sierra says.
'It might come as a shock if you didn't know the ATO would come knocking, but the plus side is, you're still up. It's not as if the taxman takes the whole lot, just a percentage.'
For those earning less than the tax-free threshold of $18,200, profits can be kept in full. But if you're in the top tax bracket ($180,001 or more) you could lose 45 cents in every dollar of profit to tax.
But there's still a silver lining for long-term holders.
'If you sell your crypto after holding it for more than a year, you'll be eligible for a 50% discount,' Sierra explains.
'That's the key to minimising your contributions. There's merit in buying early in the so-called crypto winter, so by the time a bull market swings around, you've seen out your 12 months and can withdraw at any time without paying full freight.'
While the 'golden era' of Bitcoin-as-anarchy may be over, the illusion that crypto lives outside the reach of regulation still lingers.
But Sierra says that's a dangerous misconception.
'A lot of people hear that crypto is decentralised and think that means it's unregulated, that's not entirely true,' she says. 'The taxable amount will depend on your personal income and be treated as part of it.'
With regulators, banks, and tax offices worldwide tightening the screws, the age of crypto as a sovereign loophole is rapidly ending.
'My advice is do your due diligence on crypto before you invest,' Sierra says.
'And that's not just for tax purposes school yourself up on how the whole system works, and what are the potential risks. That's how you avoid them.'