An updated assessment guide by the ATO has revealed that cryptocurrency donations may be liable for both capital gains tax (CGT) and donation tax rules.
So if you are thinking about donating any cryptocurrency assets and then claiming back on the donation, then there are a few things you’re going to need to consider.
Firstly, it is imperative that you discuss any crypto activity with your tax advisor here at Accounting Tax Solutions, as there are many ways in which the ATO can monitor you. Cryptocurrency transactions are fast becoming a standard for many individuals, so the ATO have developed ways to keep ahead of this, to ensure that any fraudulent actions are identified and reprimanded.
Regarding donations, if they are intended for not-for-profit organisations, make sure that they have been set up to accept crypto assets and that they were transferred correctly into the legal name of the receiver.
When it comes to claiming a tax deduction on the donation, there are gift and donation conditions that need to be met before it qualifies.
One of the more notable of these conditions is that the organisation receiving the donation has a deductible gift recipient (DGR) status.
Donations through social media or crowdfunding platforms will not qualify unless the recipient has a DGR status. You are able to look up the DGR status of an organisation at ABN Lookup: deductible gift recipient.
The donation of crypto could be seen as a capital gains event, as crypto assets are seen as property. If capital gains tax applied, then they would be received at the market value at the time of the donation.
Generally speaking, there’s no need to pay CGT on donations to DGRs, however, you cannot claim a tax deduction on these.
You will need to report the transaction in both the CGT and donations sections in your tax return however, so it is vital that you keep extremely good records of all cryptocurrency activity. This is regardless whether you are using it for personal use, for investments or for your business.
Recording things like the date of transactions, the value in AUD at the time of the transaction and details regarding who and what the transaction was for are just basic necessities to safeguard yourself.
If you are feeling a little overwhelmed with the tax obligations surrounding cryptocurrency, you’re not alone. Thankfully, we here at Accounting Tax Solutions have keen knowledge in this sector and are eager to support you with your experience.
Please contact our office on 07 5559 1200 or visit our office located in the Woolworths Shopping Centre, Mudgeeraba Market Shopping Centre. Our office is located on 3 Swan Lane car park entrance, between Coastal Dental upstairs from us and Gumnut bakery down the stairs. We look forward to seeing you