Tax Return Question (AUS)

Hello,
I’m currently trying to sort out my crypto in regards to taxes. It was the end of financial year in June in Australia and now it’s time to get everything calculated and sent for our yearly tax return. Koinly seems to be doing a great job with calculating all my (incredibly small) gains but there’s one entry I can’t understand. It’s referring to me purchasing an NFT for ETH back in November and this is how it shows up:

Fiat value A$5,620.13 per ETH A$13,562.59

Cost basis A$10,425.88

Gain A$3,136.71

Can someone please tell me how that gets calculated as a gain as in this case I minted an NFT and I never sold it so how does this count as a gain? I don’t understand. Thanks in advance to anyone able and willing to help me.

1 Like

Hey @Paul_Balest :wave:

Thanks for getting in touch :slight_smile:

From what you have described, it seems that your ETH which you disposed of to mint this NFT cost you A$10,425.88 but the value of this ETH at the time of disposal was A$13,562.59, therefore calculating a gain.

Now it seems that there is a misunderstanding here when it comes to “minting” the NFTs. When you are minting, you are seen to be disposing of crypto, in this case, the ETH and it triggers a taxable event.

If you don’t believe this should be taxable, there are ways in which you can work around this, but I would highly recommend that you seek clarification from a tax expert in Australia, to understand the rules around these types of transactions.

I hope the above makes sense? I would also urge you to take a look at our Crypto Guide for Australia. for further reference.

Best,
Ali :rocket:

Hi @Paul_Balest, When you purchased the NFT you disposed of ETH. Koinly calculated the cost base of the ETH you spent at A$10,425.88. The market value of that ETH when you purchased the NFT was A$13,562.59. Hence, you had a capital gain of the difference between the value of the ETH when you disposed of it for the NFT and your cost base of that ETH, i.e. a gain of A$3,136.71.

Key point here: Koinly is calculating the gain on your disposal of ETH. Nothing to do with the NFT you purchased except that Koinly will (should) record the cost base of that NFT as $A13, 562.59. This will be used to calculate a gain or loss when you sell the NFT.

Hope this helps.

Thanks a lot for the replies. I understand what you’re saying even though it seems weird as I effectively didn’t earn any wealth by minting an NFT but I guess it is what it is. I’ve been reading through all the crypto tax rules in Australia and I’ll of course refer to a professional just to make sure I don’t mess it up. I was just wondering if you can assist me with a couple of things.

1. Tax free threshold: You’ll only start to pay Income Tax when you hit $18,200 in total income per year.

3. Personal use asset: You can get an exemption from capital gains tax if you hold cryptocurrency as a personal use asset. If you purchase no more than $10,000 of cryptocurrency to directly buy something else with crypto for personal use or consumption, that too over a short time period, you’re eligible for this exemption.

The first point refers to only crypto income or do I have to add my income from my normal job? I’d assume I have to add it all together but it’s kind of ambigous. Who would have crypto and earn less than 18k in a year?

I might actually fit in the third point as I basically liquidated a lot of my portfolio to be able to purchase this NFT, so maybe maybe it would count as a personal use asset even though it’s slightly over the 10k threshold so I don’t know.

Apologies for the wall of text again, but playing around with crypto and NFTs this year, has basically only cost me money and it bothers me that I have to pay taxes on something that currently I would sell at a loss.