On a temporary visa in Australia and have a crypto portfolio in the works? We walkthrough the main tax implications for your temporary tax resident situation.
The rise of cryptocurrency has made it easier to earn an income and travel abroad, and many folks are naturally asking where, if at all, they should pay tax. For temporary residents of Australia, this has been a difficult area to answer definitively, as the Australian Taxation Office (ATO) has not yet published any substantive rulings on the matter. Moreover, the distinction between hobbyists and traders complicates the issue – cryptocurrency trades for the former fall under capital gains tax rules whereas the latter is ordinary income. To walk through this, we have answered the most common questions we get asked by Temporary Residents.
Am I a temporary resident of Australia?
- You’re a temporary resident if you:
- Hold a temporary visa granted under the Migration Act 1958
- Are not an Australian resident within the meaning of the Social Security Act 1991
- Do not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991.
The determination between residents and non-residents is on a case by case basis and the tax office reviews the weight of evidence in making its decision. Practically speaking, the tests can be quite expansive as they have an interest in selecting as residents for obvious reasons.
If I am a tax resident, what am I taxable on in Australia?
Temporary residents are taxed on Australian taxable property (ss768-910(1)) – that mainly being houses/apartments, mining tenements and CGT assets acquired by businesses through a permanent establishment in Australia. Under the rules, ordinary income and statutory income derived from non Australian sources is considered non assessable non exempt (NANE) income . The active word in the rules being derived, implies that so long as the income is earned whilst temporary resident status is still held, the income will be considered NANE – in essence meaning it is considered income however not taxable.
If an individual was transitioning between being a temporary resident to becoming a full resident, they would need to be careful of this distinction. Residents are taxable on their worldwide income, hence any trades regardless of where they took place or where the exchange is based will be taxable in Australia. Temporary residents, whether they be hobbyists or full time crypto traders will not be taxed on their cryptocurrency income.
Crypto income earned through an employment arrangement based in Australia will however be taxable (ss768-910(3)).
What happens if I am a temporary resident now then become a full tax resident later?
As mentioned, residents are taxed on their worldwide income which means any trading activity will be taxable in Australia.
Hobbyists will be treated under the capital gains tax rules and the cost base of their crypto assets (i.e. what they initially paid for them) is substituted for their market value at the time they become a resident (s855.45).
Crypto traders will be treated under the ordinary income rules of running a business with crypto purchases viewed as expenses and sales as business income. Expenses such as mining/computer equipment will be deductible.
How long should I keep records for?
You are required to keep tax records for up to five years. Most cryptocurrency information is stored digitally in the cloud however we recommend a hardware wallet such as the Ledger or Trezor series. Also, ensure to keep a storage space with all visa and residency details whilst in Australia, making sure to note specific dates such commencement and cessation of temporary residence.
Who should I speak to?
Fullstack Advisory are specialists in cryptocurrency taxation and have extensive experience dealing with residency matters. We also recommend engaging the tax office early in some cases and can guide you through the complexities of their requirements. Reach out for a consult with our crypto tax team today.