Why Australians who made a loss on Bitcoin can reduce this year's tax bill - but here's how to avoid a fine

 Australians who bought Bitcoin this year at the height of the cryptocurrency frenzy can reduce their tax bill - but there are penalties for those who try to hide their gains.

Bitcoin surged to $80,000 in early April after American billionaire Elon Musk declared he would accept it as payment for his Tesla electric cars.

Little more than a month later, Bitcoin dived after Musk changed his mind, arguing cryptocurrencies were created by solving complex maths equations, with those computer functions using too many fossil fuels.

Australians who bought Bitcoin this year at the height of the cryptocurrency frenzy can reduce their tax bill - but there are penalties for those who try to hide their gains

Penalties for lying about cryptocurrency

CARELESS: 25 per cent

RECKLESS: 50 per cent

DELIBERATE: 75 per cent

REPEAT OFFENDER: 95 per cent

Source: H&R Block analysis of Australian Taxation Office penalties for failing to declare capital gains

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China's Communist Party government also announced it would ban cryptocurrency transactions.

Since the start of May, Bitcoin has dived from $74,000 to $50,000, leaving investors exposed if they bought amid the hype rather than a year ago when Bitcoin was worth just $13,000.

Existing tax rules allow Australians who make a loss on investments, including shares, to claim that loss against their capital gains but not their taxable income.

H&R Block director of tax communications Mark Chapman said Australians could only claim that loss against the capital gains they made in 2020-21 from selling shares, property or cryptocurrency.

'If you don't have capital gains in the same year or you don't have enough capital gains to use up the loss, you have to carry it forward to later years and use it against the first available capital gain that arises,' he told Daily Mail Australia.

'You can't use the loss against wages/salaries, business profits, rent, or interest and dividends.'

Bitcoin surged to $80,000 in early April after American billionaire Elon Musk declared he would accept it as payment for his Tesla electric cars. Little more than a month later, Bitcoin dived after Musk changed his mind, arguing cryptocurrencies were created by solving complex maths equations, with those computer functions using too many fossil fuels

Contrary to popular belief, the Australian Taxation Office can trace cryptocurrency transactions.

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