You’re about to donate some of your hard-earned crypto to a cause you love. It feels like a great way to give back and support something meaningful, right?
Just because you’re giving doesn’t mean you’re free from tax responsibilities. In fact, gifting crypto can trigger a tax event that could leave you with an unexpected tax bill.
If you’re not careful, you could end up with a tax surprise on your hands. Let’s take a closer look at what you need to know before making that generous donation.
How Donating Crypto Could Trigger Taxes
When you gift or donate crypto, you are technically disposing of an asset.
As per Australian tax law, you are triggering what is known as a Capital Gains Tax (CGT) event.
Wait, what?
Yes, just like if you sold that crypto for cash, donating it can create a taxable event.
That means you need to know the value of your crypto at the time you donate it, because if it’s appreciated in value since you bought it, you could be facing a capital gain that you’ll have to report.
Tax Deductions for Crypto Donations
You’re probably thinking, ‘If I donate crypto, I should get a tax deduction, right?’ Well, yes, but there’s a catch.
You can only claim that deduction if you donate to an organisation that is registered as a Deductible Gift Recipient (DGR). Without that DGR status, you won’t get the deduction—no matter how worthy the cause is.
Also, donations made via social media platforms don’t automatically count, even if they’re for a good cause. You’ll want to double-check if the recipient is a DGR before you get your hopes up.
What About the Tax on Donations to Cultural Causes or Personal Crypto Assets?
Here’s some good news: if you’re donating crypto as part of a testamentary gift (through your will) or under Australia’s Cultural Gifts Program, you might be off the hook for Capital Gains Tax (CGT).
Receiving Crypto as a Gift: What Happens to You?
Okay, so now you’re wondering what happens if you receive crypto as a gift. The short answer? No CGT implications at the time you receive it. But if you later sell, swap, or use that crypto for something else, a CGT event can occur.
That means you will have to track the crypto’s value when you receive it and report any gains or losses when you dispose of it.
Keeping Records: The Key to Avoiding Tax Mistakes
One thing we cannot stress enough: keep everything. From the moment you donate or receive crypto, you’ve got to keep detailed records. Date, value, type of crypto—you need it all.
Without these records, you’re just guessing when it comes to calculating capital gains (or losses) for your taxes. And trust me, the ATO won’t be sympathetic if you don’t have solid proof of your transactions.
So, when you donate crypto, keep track of its market value at the time of the gift. If you’re receiving crypto, record how much you received and its value at that moment.
It might feel like a chore, but doing this right now will save you from headaches later on.
Don’t Let Crypto Donations Surprise You
Donating crypto can be a generous act, but if you’re not aware of the potential tax implications, it could end up costing you more than you bargained for. If you are considering donating crypto, it is crucial to understand how CGT works and how to keep track of your transactions.
Do not let the taxman sneak up on you after your donation—stay informed and make sure you are doing everything right.
So, next time you think about gifting or donating crypto, take a second to ask yourself: “Could this trigger unexpected taxes?” The answer just might surprise you.
Stay smart, stay informed, and make your crypto donations count in the best possible way.
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