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NFT creators and traders and the Australian tax system

NFT creators and traders

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Are NFT creators and traders taxable?

According to the ATO, the tax treatment of NFT creators and traders follows the same rules as bitcoin. As a result, because NFTs are considered CGT (capital gains tax) assets, the following activities will result in a taxable event:

  1. Selling NFTs in exchange for cryptocurrency
  2. Exchanging one NFT for another NFT or fungible cryptocurrency like Bitcoin
  3. Giving an NFT as a gift (unless it is to a tax-deductible gift recipient)

NFT creators and traders that lose money by selling an NFT will incur a capital loss that can be used to offset capital gains, similar to cryptocurrency taxation. It’s crucial to remember that while establishing (minting) an NFT isn’t a taxable event in and of itself, selling or trading the NFT will result in a capital gains tax event. Speak to an NFT creators and traders accountant today.

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Do you pay taxes as an NFT investor?

When you buy and sell different NFTs, you trigger a capital gains taxing event. To figure out your capital gain, keep track of the cost of the NFT you acquired in AUD at the time. The majority of NFT transactions are made in Ethereum, a popular cryptocurrency. Because of the volatile nature of the crypto market, it’s crucial to keep track of the price of Ethereum at the time you bought the NFT. This value must then be converted to Australian dollars, your cost base. The difference between your sales proceeds and your cost base is your capital gain on the NFT sale when you sell it.

Transaction costs – sometimes known as gas fees – in cryptocurrencies are commonly in the $200 range. It’s critical to include transaction fees in your recorded costs to deduct as much money as feasible. Speak to an NFT creators and traders accountant today.

How do I report NFT trades for tax purposes?

NFTs have the same tax classification as other cryptocurrency assets; thus, they must comply with reporting requirements. For each NFT transaction, you must keep track of three separate numbers:

  • The cost of your NFT (in Ethereum)
  • The transaction fee (in Ethereum)
  • Current price of Ethereum in AUD

How can Ingrams Accounting help?

It’s a difficult process to precisely locate the data above for every NFT transaction, especially because most NFT users want to flip them for a profit, which means they’ll take on hundreds of NFT transactions over the course of a fiscal year. Rather than manually calculating NFT taxes, the simplest approach to automate this procedure is to contact us and have one of our professional cryptocurrency accountants handle it for you. Speak to an NFT creators and traders accountant today.

Common questions

Do I pay Tax on NFTs?

In general, for most users buying or selling NFTs, you will treat NFTs in the same manner as normal cryptocurrency as they fall under the same rules for Crypto assets and Capital Gains.  The following actions with NFTs are considered disposals and will trigger CGT events:

  • Selling NFTs in exchange for cryptocurrency
  • Exchanging one NFT for another NFT or fungible cryptocurrency
  • Giving an NFT as a gift (unless it is to a tax-deductible entity such as an Australian charity)

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    South Yarra Victoria 3141

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