The cryptocurrency market is fast-paced and constantly evolving, and with it comes the challenge of navigating tax obligations. While investing in crypto can be highly rewarding, the way you manage your transactions and the timing of those transactions can significantly impact your tax liability. As we look ahead to 2025, now is the perfect time to start planning and implementing tax-efficient strategies to maximise your returns.
1. Take advantage of the capital gains tax (CGT) discount
In Australia, cryptocurrencies are treated as property for tax purposes, which means that any gains you make when selling or trading crypto are subject to capital gains tax (CGT). However, holding onto your crypto for more than 12 months can make you eligible for a 50% CGT discount. This means you’ll only pay tax on half of the profits from the sale of your assets if you’ve held them for at least a year.
How to use this strategy for 2025:
- Long-term holding: If you’re a long-term investor, make sure you’re timing your sales and disposals to maximise the CGT discount. For example, if you’ve held certain coins for 10 months, it might be worth waiting a couple more months to qualify for the discount.
- Track your dates: Keep a close eye on the purchase dates of your assets, especially in a volatile market, to avoid missing out on the 12-month CGT discount.
2. Plan the timing of your transactions
Timing is everything when it comes to crypto transactions, especially when considering the tax implications. By strategically planning when to buy and sell, you can take advantage of lower tax rates or offset gains with losses to minimise your tax bill.
Here’s how timing can help:
- Sell during a low-income year: Your CGT is added to your income for the year, which means the more you earn, the higher the tax rate on your capital gains. If you anticipate having a lower income in 2025 (due to a career break, business loss, or other factors), it could be a good time to realise your crypto gains at a lower tax rate.
- Offset gains with losses: If you have made gains on certain assets, consider selling underperforming or loss-making crypto to offset those gains. This strategy, known as tax-loss harvesting, can significantly reduce your taxable income. Any losses can be used to offset future gains, too, if not all used in the current tax year.
3. Take advantage of tax-loss harvesting
Crypto markets can be volatile, with prices soaring one day and plummeting the next. While price dips may seem like bad news for your portfolio, you can actually use these downturns to your advantage with tax-loss harvesting. This involves selling assets that are currently in a loss position, realising the loss, and using it to offset your capital gains from other crypto assets (or other investments) that you sold at a profit.
How to use this strategy for 2025:
- Review your portfolio regularly: As 2025 approaches, keep an eye on your underperforming assets. By selling them and realising the loss before the end of the financial year, you can reduce your overall capital gains and, consequently, your tax bill.
- Re-buying assets: Be mindful of the ATO’s “wash sale” rules, which prevent investors from selling an asset solely to claim a tax benefit and then immediately buying it back. If you’re planning to repurchase the same asset after selling it for tax purposes, make sure you consult a tax adviser about how to do so without breaching ATO guidelines.
4. Record every transaction
Good record-keeping is key to staying compliant with crypto tax laws and ensuring you can take advantage of all available deductions and strategies. Since the ATO requires detailed reporting of every crypto transaction, maintaining accurate records will not only save you time but also help ensure you’re not overpaying on your taxes.
Records you should keep:
- Date of each transaction: Every time you buy, sell, trade, or exchange crypto, you need to document the date.
- Transaction value in AUD: Keep a record of the value of each transaction in Australian dollars at the time of the transaction.
- Reason for the transaction: Whether you’re purchasing an asset, trading one crypto for another, or making a payment, note the purpose of each transaction.
- Counterparty details: You may need to provide information about the other party in the transaction, even if it’s just a wallet address.
5. Consider the tax implications of staking and yield farming
Staking and yield farming – where you lock up your crypto to earn rewards or interest – are becoming increasingly popular. However, the ATO treats staking rewards and similar income as taxable income. This means that any crypto you earn from staking or other similar activities is subject to tax in the year you receive it, and you may also face CGT when you eventually sell the crypto you earned.
Here’s how to approach it:
- Report staking rewards as income: Make sure to include any staking or yield farming rewards in your income tax return for the year they are received.
- Consider CGT on rewards: When you eventually sell or trade these rewards, CGT will apply. Plan your transactions accordingly to take advantage of the CGT discount, if possible.
6. Be mindful of airdrops and forks
Airdrops and hard forks are other ways crypto holders can receive new coins. Like staking rewards, these are considered taxable income at the time they’re received, and you’ll also have to pay CGT when you sell or trade them later.
Plan for airdrops and forks in 2025:
- Document the value of the new coins: When you receive an airdrop or a new coin after a hard fork, record the value of those coins in AUD on the day you receive them. This value will be counted as taxable income.
- Plan your sales: If you decide to sell these coins later, consider holding them for more than 12 months to benefit from the CGT discount.
7. Use a crypto tax specialist
Navigating the intricacies of crypto taxation can be overwhelming, especially if you’re an active trader or hold a variety of crypto assets. Working with a crypto tax specialist can help ensure that you’re not only compliant with ATO rules but also taking advantage of every opportunity to reduce your tax liability.
How a crypto tax specialist can help:
- Expert advice: Crypto tax specialists are familiar with the nuances of crypto transactions and ATO requirements, ensuring that your tax return is accurate and compliant.
- Maximise deductions: Specialists can help you identify opportunities to minimise your tax bill, including lesser-known deductions and strategies.
- Avoid penalties: Working with a professional reduces the risk of errors that could lead to costly penalties or audits from the ATO.
Plan ahead for crypto tax success in 2025
Crypto taxation may be complex, but with the right strategies and careful planning, you can minimise your tax burden and maximise your returns. To make the most of these strategies, consider consulting with a crypto tax specialist who can help you navigate the complexities of crypto tax law and ensure you’re making the most of your investments.
Need help navigating the complexities of crypto taxes? Learn more about working with APS.
Written by APS Senior Accountant, Stephen Fry.
Stephen is an accountant with over 13 years of professional expertise in the areas of taxation and accounting. Currently serving as a senior tax accountant at APS Tax, Stephen offers comprehensive guidance and ensures compliance in all tax-related matters. He has developed a specialised focus in areas such as self-managed superannuation funds, cryptocurrency taxation and leveraging software and technology to assist clients in streamlining their processes. Beyond his professional pursuits, Stephen cherishes quality time with his family and enjoys unwinding on the golf course. On the weekends he also enjoys following the AFL and watching British comedy television.