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Save Money with Crypto Losses: Australia Investor’s Guide 2023

Save Money with Crypto Losses: Australian Investor’s Guide 2023

If you’ve lost money on a cryptocurrency trade this year, you can save money on your tax return.

In Australia, crypto losses can offset your capital gains — which means claiming your losses can lead to serious tax-savings. 

In this guide, we’ll break down everything you need to know about how crypto losses are taxed. By the time you’re finished reading, you’ll understand how to report your losses on your return (and even use them to offset gains in future tax years!) 

How is cryptocurrency taxed in Australia? 

Before we discuss how crypto losses can reduce your tax bill, let’s review the basics of cryptocurrency taxation. 

In Australia, cryptocurrency is subject to capital gains tax and ordinary income tax. 

When you dispose of cryptocurrency, you incur a capital gain or loss depending on how the price of your crypto has changed since you originally received it. 

When you earn cryptocurrency, you’ll recognize ordinary income based on the fair market value of your crypto at the time of receipt. 

For more information, check out our complete guide to how cryptocurrency is taxed in Australia

Are crypto losses tax deductible?

In Australia, losses from cryptocurrency can be used to offset capital gains from crypto, stocks, and other forms of property. 

Crypto losses example

If you have a net loss for the year, you can carry your loss forward to offset capital gains in future tax years. 

As a result, many investors choose to intentionally sell their cryptocurrency and other assets at a loss for the tax benefits. This strategy is known as ‘tax-loss harvesting’ or ‘tax-loss selling’. 

Can I carry forward my crypto losses? 

If you have a net loss for the year, you can carry your losses forward to offset gains in future tax years. While there’s no limit to how many years you can carry your losses forward, you are required to use them to offset gains at the earliest available opportunity. 

Can I carry back my crypto losses? 

In Australia, you are not allowed to carry back crypto losses to previous tax years. 

Are there any limits to crypto tax loss harvesting in Australia?

In recent years, the ATO has cracked down on ‘wash sales’ — the practice of selling an asset, claiming a capital loss, and then acquiring the same asset or a substantially similar one. 

Unlike other countries, the Australian tax code doesn’t specify any specific timeframe that makes a transaction a ‘wash sale’. Transactions are considered ‘wash sales’ when they’re undertaken for the sole purpose of generating a tax benefit. 

Can I use crypto losses to offset my income? 

Individuals cannot use crypto losses to offset regular income (you can only offset other capital gains). However, businesses can treat crypto losses as a deductible expense. 

How do I claim crypto losses on my taxes? 

You should use the Capital Gain or Capital Loss Worksheet to calculate your net gain/loss for the year. 

Once you’ve completed the worksheet, you can report your net capital gain on item 18 of your tax return. This is your total capital gain for the year after taking into account all of your capital losses. 

Capital gains worksheet

If you have a net loss for the year, you should not put anything in the net capital gain section. You can report your net capital loss on V item 18. 

How CoinLedger can help 

Trying to keep track of your cryptocurrency gains and losses can be difficult. CoinLedger can help. 

There’s no need to keep records of your crypto transactions. CoinLedger automatically connects with exchanges like CoinSpot and blockchains like Ethereum, so you can generate a comprehensive tax report in minutes. 

Get started with a free account today

Frequently Asked Questions

Do you pay taxes on crypto losses?

No. Crypto losses can reduce your capital gains and your overall tax liability. 

How much crypto losses can you claim? 

There is no limit to how much loss you can claim on your tax return. If you have a net loss for the year, it can be carried forward to future tax years. 

Does tax-loss harvesting apply to crypto?

Yes. Tax-loss harvesting your cryptocurrency can help you save thousands of dollars on your tax bill. 

How long can capital losses be carried forward?

There is no limit to how long capital losses can be carried forward in Australia. 

How do I avoid crypto taxes in Australia? 

While there’s no legal way to evade your cryptocurrency taxes, claiming your capital losses can help you reduce your tax bill. For more information, check out our guide on how to avoid crypto tax in Australia

Do you pay tax on crypto only when you cash out?

There are some situations where you are required to pay tax even if you never ‘cash out’ to fiat currency. Examples include earning staking income and crypto-to-crypto trades.

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