Donating crypto tax incentives and benefits
Contributing cryptocurrency to a Deductible Gift Recipient (DGR) charity can be a smart way to lower your taxable income and have the most impact with your contribution. As per the Australian Taxation Office (ATO), when you donate appreciated cryptocurrency, you may be able to sidestep capital gains tax (CGT) on the increase in value since you acquired it if you satisfy certain requirements. This means you’re not taxed on the profit between the initial purchase price and the value at the donation time.
This method could make cryptocurrency donations more cost-effective than cash gifts as you’re potentially able to claim the full market value of your donation without a tax penalty, optimising your tax benefits while supporting a cause you value.
This guide is intended to serve as an introduction to the potential benefits of donating with the Australian tax rules on cryptocurrency. It’s important to note that tax law is complicated and circumstances may vary, this is by no means financial advice and as always we recommend that you speak to a tax professional to maximise your tax benefit.
Overview of crypto taxes in Australia
In Australia, cryptocurrency is treated as an asset for tax purposes. When you sell, trade, use, or otherwise dispose of cryptocurrency, you are subject to capital gains tax (CGT) on any profit made from these transactions. The ATO calculates CGT based on the difference between the purchase cost and the sale or disposal price.
This unfortunately does mean that many donations of cryptocurrency may be subject to CGT, though in some specific circumstances, this may be exempt, such as cryptocurrency bought and used as what the ATO calls a personal use asset or when acquired for less than $10,000. As with many assets, if you hold cryptocurrency for over 12 months, you may qualify for a 50% discount on the CGT, though donating may allow you to avoid the capital gains tax altogether.
Case examples of tax savings from crypto donations
This all sounds good but what does it look like in practice? Let’s say you bought an amount of Bitcoin for AUD 5,000, and its value has risen to AUD 10,000. By choosing to donate this Bitcoin to a DGR charity like Save the Children Australia, you can usually avoid paying capital gains tax (CGT) on the AUD 5,000 profit. Instead of selling and incurring tax liabilities, you can claim a deduction for the entire AUD 10,000 market value.
This simplified scenario clearly shows how donating appreciated cryptocurrency can reduce your taxable income while benefiting a charity, though there are some key considerations to keep in mind.
When is crypto not taxed in Australia?
Cryptocurrency isn’t subject to CGT when disposed if it meets any of the following criteria:
These assets are also generally exempt from CGT when they’re personal use assets. This is a bit of a grey area but means that if you keep or use crypto mainly for personal use or consumption, such as purchasing crypto with the intention to use it as currency to purchase something specific in the near future. Though even when purchased for this purpose your digital assets may not maintain personal use status if your usage of the crypto changes, this is part of why we recommend keeping comprehensive records of your transactions and speaking with a registered tax professional.
Start donating crypto today for tax benefits
Whether you qualify for a capital gains tax exemption or not, giving cryptocurrency to a DGR charity is a great way to support causes you care about while potentially reducing your tax benefit.
Donate today with crypto or traditional currencies to take advantage of these benefits and join Save the Children Australia in making a meaningful impact in the world.