How do I deal with an online/virtual/crypto currency such as bitcoin and ethereum so that the capital gains and losses carry through to the tax return correctly?
Background Information
The ATO has stated the cryptocurrencies such as bitcoin are not to be treated as foreign currencies and should be treated as a CGT Asset.
- TD 2014/25 Income tax: is bitcoin a 'foreign currency' for the purposes of Division 775 of the Income Tax Assessment Act 1997 ?
- TD 2014/26 Income tax: is bitcoin a 'CGT asset' for the purposes of subsection 108-5(1) of the Income Tax Assessment Act 1997 ?
- ATO Website: SMSF investing in crypto assets
- ATO Website: Tax-treatment of crypto currencies in Australia
Things to remember
- Trustees and members also need to ensure that investments in cryptocurrency are allowed under the SMSF’s deed.
- Ensure the Fund's Investment Strategy allows the investment
- Ensure the Investment is not breaching the Sole Purpose Test
- Ensure the Investment is held in the name of the Trustee/Fund
- For the purpose of calculating member balances at 30 June, the ATO will accept the 30 June closing value published on the website of a cryptocurrency exchange that reports on historical cryptocurrency values.
- Ensure the key audit assertions of ownership, existence and valuation can be satisfied
- Cryptocurrencies such as bitcoin are not ‘listed securities' so do not fall within the exceptions. They therefore cannot be acquired from a related party.
- Current maximum amount of decimal places available when entering securities is 6.
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Important:
With the new Account 70040 added for Cryptocurrency, transactions to the 70040 account will go to a new tax return label in the SMSF return for Cryptocurrency.
If a fund already has an existing custom Cryptocurrency account in the chart of accounts, you will need to move the balances from that account to the new 70040 account in order for the amounts to flow to the correct tax return label.
To move the amounts to the new account, use the Transaction Recode function or Share Code/Class Change function.
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Creating the accounts for cryptocurrencies
A Control Account has been added into the Chart of Accounts to help the treatment of cryptocurrency (Account 70040 - Cryptocurrency)
| From the Main Toolbar, go to Accounting. |
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| Select Chart of accounts from the list. |
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- From the Chart of Accounts screen, select Add Account and select Investment. The New Investment Account screen will appear.
- Under the Account Class heading, select Sub Account.
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Choose the Investment Type as Cryptocurrency. This will determine the account number used in the chart for the created investment.
- Select the security for the Cryptocurrency. If an existing security does not exist, follow the instructions found in Adding a Security to add the new security.
5. Click Save to add the new investment account
Recording purchases and disposals
Recording purchases and disposals are processed as like any other CGT asset in Simple fund 360.
For purchases, see How to Enter Investment Purchases.
For disposals, see How to manually post an Investment Disposal
Users can also utilise the BGL Excel (XML) import to import investment purchase and disposal transactions in bulk.
Example of cryptocurrencies codes
| Code | Cryptocurrencies |
|---|---|
| BTC | Bitcoin |
| ETH | Ethereum |
| XRP | Ripple |
| LTC | Litecoin |
| XLM | Stellar |
| DAS | Dash |
| BTS | Bitshare |
Recording cryptocurrency swaps
Recording a cryptocurrency swap is processed by recording a disposal of one investment to repurchase another.
- For purchases, see How to Enter Investment Purchases
- For disposals, see How to manually post an Investment Disposal
For example, a swap of BTC for an ETH, would mean recording a disposal of BTC, balanced against the purchase of ETH.
Revaluations of cryptocurrencies
Daily market prices are available for more than 250 cryptocurrencies thanks to NBOC, a single source for daily cryptocurrency pricing. These are available in the last tab on the Investment Security List:
- Some of this information is different from other securities which are explained below:
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Price $ |
The market price used for revaluations. |
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Confidence |
A score between 0 and 100 relating to the level of confidence in Price $. A higher score indicates more confidence. |
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Price Low |
The lowest price received from sources in the past 24 hours |
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Price High |
The highest price received from sources in the past 24 hours |
For more information about confidence scores and more, see NBOC's FAQ page.
- For the purpose of calculating member balances at 30 June, the ATO will also accept the 30 June closing value published on the website of a cryptocurrency exchange that reports on historical cryptocurrency values.
Manually Entering Cryptocurrencies / Security Prices
Any price that differs from the market price provided by NBOC will have to be entered manually.
Complete the following steps to ensure the Cryptocurrency is correctly valued at 30 June:
- Ensure the total units entered into the Investment Account is correct.
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- This will be multiplied by the Security Price entered in Step 2 to reach the Market Price of the investment.
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Manually enter a security price for the investment as at 30 June. For instructions, see: Manually Revaluing Security Prices.
- Create entries to 30 June. The system will automatically revalue the investment.
The calculation for this revaluation is:
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- Total Units at 30 June x Security Price at 30 June.