Crypto and the ATO: reviews, audits and amendments

The ATO generally treats crypto as property, not money. For most people, selling, swapping, spending or giving away crypto is a capital gains tax (CGT) event that belongs in that year's tax return, and the ATO gets purchase and sale data from Australian crypto exchanges to check that it is there.

When the two don't match, the usual result is an ATO crypto letter, and sometimes a review or audit that ends in amended assessments, penalties and interest. See ATO audits, reviews and objections for how we act in these disputes.

How does the ATO tax crypto?

A CGT asset is any kind of property, or a legal or equitable right that is not property (Income Tax Assessment Act 1997 (ITAA 1997), s 108-5). The ATO treats bitcoin and similar crypto as property (TD 2014/26; TD 2014/27, para 5) and each crypto asset as a separate CGT asset. Digital currency isn't foreign currency for tax purposes (s 995-1).

The treatment depends mainly on why you hold the crypto or how you got it.

How you hold or receive crypto	Usual tax treatment
As an investment	CGT on each disposal. Individuals and trusts that held it for at least 12 months may get the CGT discount (s 115-25), but see the 1 July 2027 changes below
In a crypto trading business	Trading stock (s 70-10; TD 2014/27). Profits are ordinary income and any capital gain is disregarded (s 118-25)
As staking or DeFi rewards	In the ATO's view, ordinary income at market value when received, which becomes the cost base
Mainly for personal use	Gain disregarded if it cost $10,000 or less (s 118-10(3)). Losses always disregarded (s 108-20(1))

The ATO says most people hold crypto as an investment. Whether you are instead carrying on a trading business is a question of fact, turning on factors such as the volume, regularity and organisation of the activity.

Which crypto transactions are taxable?

CGT event A1 happens when you dispose of a CGT asset, meaning ownership passes from you to someone else (s 104-10). For crypto, that generally includes selling it for Australian dollars, swapping it for another crypto asset (including a stablecoin), paying for goods or services with it, and giving it away.

Moving crypto between your own wallets is generally not a disposal, because ownership doesn't change. Keep records showing both wallets are yours.

Crypto-to-crypto swaps

Many people assume nothing is taxable until they cash out. That's generally wrong. On a swap, your capital proceeds are the market value of the crypto you receive (s 116-20(1)(b)), and the first element of the new crypto's cost base is the market value of the crypto you gave (s 110-25(2)(b)). In an arm's length swap the two are usually the same.

For example, suppose you bought one Coin A for $5,000 and later swapped it, when it was worth $8,000, for Coin B of the same value. You have generally made a $3,000 capital gain without any dollars reaching your bank, and Coin B has an $8,000 cost base.

What crypto mistakes does the ATO pick up?

Staking rewards and airdrops

In the ATO's view, staking rewards are ordinary income equal to their money value when received, and that value is their cost base when you later sell or swap them.

In the ATO's view, airdrops received as a reward for goods or services are also income. Other airdrops generally aren't income on receipt if you don't carry on a crypto trading business and they aren't part of another income-producing activity. Even so, the first element of their cost base is their market value when received, which is generally nil if they then have no or negligible value (ATO, Staking rewards and airdrops, last updated 19 August 2026). The ATO's airdrop views are also in draft ruling TR 2026/D1, published on 19 August 2026, which isn't yet final.

DeFi, lending and wrapping

ATO guidance says many DeFi "lending" arrangements involve a CGT event because beneficial ownership ends, that depositing crypto into a liquidity pool is a CGT event, and that wrapping or unwrapping a token through a smart contract is CGT event C2 (ATO, Decentralised finance and wrapping crypto, last updated 19 August 2026). The wrapping view is in draft determination TD 2026/D2 (paras 9 and 17), published on 19 August 2026.

These are ATO views, not settled law, and the ATO itself says the answer depends on the protocol's terms and how it actually operates. If significant amounts turn on that, get advice on the specific arrangement.

Lost or stolen crypto

If a CGT asset you own is lost or destroyed, CGT event C1 happens when the loss is discovered or, if you are compensated, when you first receive compensation (s 104-20). The ATO says you can claim a capital loss for lost or stolen crypto, for example where a private key can't be recovered, if you have evidence of ownership, such as the wallet address, what the crypto cost and identity-verified exchange transactions (ATO, Loss or theft of crypto assets, last updated 22 June 2026). Scam losses depend on exactly what happened.

A capital loss can generally only reduce capital gains, not other income, but unused net capital losses carry forward (ss 102-5, 102-10, 102-15).

Claiming the personal use exemption

The exemption for personal use assets costing $10,000 or less (s 118-10(3)) rarely helps with crypto. The asset must be used or kept mainly for personal use or enjoyment (s 108-20(2)), judged by how you actually kept and used it up to disposal. Crypto bought and quickly spent on personal items may qualify, but crypto held as an investment doesn't, even if you later spend some. Except in rare situations, the ATO says crypto exchanged for dollars or another crypto asset to buy personal items, loaded onto a debit or gift card, or spent through a payment gateway isn't a personal use asset (ATO, Crypto asset as a personal use asset, last updated 22 June 2026).

What does the ATO know about your crypto?

The ATO lists cryptocurrency designated service providers, broadly Australian crypto exchanges and similar businesses, among the third parties that give it purchase and sale data (ATO, Data matching, last updated 21 October 2025). Its crypto assets data-matching program covers 2014–15 to 2025–26, and the ATO expects data on about 700,000 to 1.2 million individuals and entities a year, including identity details, linked bank accounts, wallet addresses and transactions (ATO, Crypto data, published 26 April 2024). It matches that data against returns and exchanges information with overseas tax authorities. It collects the exchange data, and can require anyone else to give information or produce documents, by written notice (Taxation Administration Act 1953 (TAA), Sch 1 s 353-10).

See how ATO data matching works and what to do if the data is wrong.

Why has the ATO sent you a crypto letter?

Most crypto letters start with a mismatch, such as exchange data showing sales but no capital gain or loss in the return. The letter is usually one of these:

1. A prompt to review your return. The ATO says what its data shows and asks you to amend if needed. It isn't usually an audit, but don't ignore it.
2. A review or request for information. Questions about particular transactions or years, with a deadline.
3. An audit. A formal examination that can end in amended assessments.
4. A formal notice. A notice under Sch 1 s 353-10 is a legal requirement, and failing to comply can be an offence (TAA s 8C). See ATO information notices.

The type matters for penalties. A voluntary disclosure made before the ATO tells you an examination is to be made of your affairs gets a much bigger reduction (Sch 1 s 284-225), so check what your letter actually says before relying on that. In the ATO's view, a letter saying it is "checking this information" can be enough, although where it is only identifying or assessing risks it says it will generally still allow the bigger reduction (MT 2012/3, paras 71, 133).

Should you amend your return or make a voluntary disclosure?

If crypto gains or income were left out, correcting it yourself is usually better than waiting for the ATO. Where a shortfall results from failing to take reasonable care, the base penalty is generally 25% of it, rising to 50% for recklessness and 75% for intentional disregard (TAA Sch 1 s 284-90). A voluntary disclosure in the approved form:

• before the ATO tells you of an examination generally reduces the base penalty by 80%, or to nil if the shortfall is under $1,000 (Sch 1 s 284-225(2)–(3)), and
• after that may still reduce it by 20% if it saves the ATO significant time or resources (Sch 1 s 284-225(1)).

The ATO can also treat a later disclosure as made before the examination where it considers that appropriate (Sch 1 s 284-225(5)). See making a voluntary disclosure to the ATO.

Shortfall interest charge runs on the extra tax from the day tax under the original assessment was due until the day before the ATO gives notice of the amended assessment (Sch 1 s 280-100), and the ATO can remit it where it considers that fair and reasonable (Sch 1 s 280-160). Any amount still unpaid after the new due date attracts general interest charge instead. Neither charge is deductible for income years starting on or after 1 July 2025 (ITAA 1997 s 26-5(1A)).

How far back can the ATO amend for crypto?

The ATO can generally amend an assessment within 2 years after it gives notice of the assessment for most individuals and small and medium businesses, 4 years for others, and at any time if it is of the opinion there has been fraud or evasion (Income Tax Assessment Act 1936 (ITAA 1936), s 170(1)). The 2-year period doesn't apply where it is reasonable to conclude that a scheme was entered into for the sole or dominant purpose of getting a tax benefit (s 170(1) items 1–3), and the periods can be extended in some cases (s 170(5)–(7)). See how far back the ATO can audit.

What happens in an ATO crypto audit?

A crypto audit follows the ATO's usual stages, with more work reconstructing transactions. The ATO commonly asks for:

• transaction histories from every exchange you used, in Australia and overseas,
• the wallet addresses you control, with an explanation of transfers,
• bank statements showing money moving to and from exchanges, and
• any crypto tax software report.

It then sets out its view, often in a position paper. Reconcile the data before responding, as software reports can treat transfers between your own wallets as sales. See what happens in an ATO audit.

If you disagree with an amended assessment, you can object (ITAA 1936 s 175A). The objection must be in the approved form and state your grounds fully and in detail (TAA s 14ZU). It is generally due within 60 days after you are given notice of the amended assessment or, if later, within the 2 or 4 years after notice of the original assessment, and it can only challenge the changes the amendment made (TAA ss 14ZV, 14ZW(1B), (1BA)). See ATO objections.

What crypto records should you keep?

You must keep records of everything that can reasonably be expected to be relevant to working out a capital gain or loss, and reconstruct them if they don't exist (ITAA 1997 s 121-20). Keep them until 5 years after it becomes certain no further CGT event can happen to which they are relevant (s 121-25). Traders also need business records (ITAA 1936 s 262A).

For each transaction, the ATO expects a record of the date, purpose, other party (a wallet address is enough) and Australian dollar value at the time, plus exchange records, receipts, wallet records, and adviser and software costs. It suggests exporting your transaction history at least every 3 months and before closing any account (ATO, Keeping crypto records, last updated 22 June 2026).

What changes for crypto from 1 July 2027?

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 changes how individuals and trusts are taxed on capital gains:

• the 50% CGT discount applies to them only for CGT events before 1 July 2027 (ITAA 1997 s 115-100),
• for later events, an Australian resident individual who isn't a temporary resident can instead have the cost base of an asset held for at least 12 months indexed for inflation from 1 July 2027, and trusts get a similar result for those beneficiaries (ss 110-36(1A), 114-10, 114-25), and
• a minimum 30% rate of tax can apply to an Australian resident individual's capital gains, generally only the part that accrues from 1 July 2027, with some exceptions (Div 119).

An individual who acquired crypto before 1 July 2027 and still holds it at the end of 30 June 2027 is generally treated as selling it just before 1 July 2027 for its market value and reacquiring it for that amount, unless they have been a foreign or temporary resident while holding it (ss 112-155, 115-105). The gain or loss to that date is deferred until a later CGT event, such as a sale or swap, happens to that crypto, and a deferred gain can still get the 50% discount if the crypto was acquired at least 12 months before that later event (s 112-160). If the Minister determines an apportioning method, it can be chosen instead of market value (s 112-185), but as at October 2026 the ATO said the Government was still developing that method. Trusts have similar rules (ss 112-165, 112-170). Keep records that will let you show each holding's market value immediately before 1 July 2027. The ATO says it will publish more guidance on working out market values, and that a valuation can't be obtained in advance because it can't be forward-looking (ATO, CGT reform – guidance and market valuations, 19 October 2026).

How we help with crypto tax disputes

Your accountant can often handle a simple amendment. A crypto tax lawyer matters most when amounts are large, the treatment is contested, an audit has started, or there is any suggestion something was deliberately left out. Working with your accountant, we:

• read the letter and confirm what the ATO wants, the years and the deadlines,
• reconcile exchange, wallet and bank data and advise on the contested questions,
• correct the record with amendments and voluntary disclosures, seeking remission of penalties and interest where there are grounds, and
• handle the audit, including information requests, position papers and objections.

Next step

Send us the ATO's letter or message (every page), your returns for the years it covers, your exchange statements, any crypto tax software report and a list of your wallets. If you think something was left out of a return, tell us on the first call: we'll explain whether to amend, disclose or answer the ATO first, and what the deadlines are.