Key Takeaways
- Trading NFTs for other NFTs or cryptocurrencies triggers capital gains tax
- Earning NFTs, creating NFTs as an artist, or NFT-derived income falls under income tax brackets
- Creating, selling, or trading NFTs as a business falls under business taxation rules
- ATO requires tracking of NFT trades with key information (sales proceeds, gains/losses, income, etc.)
- Using a crypto portfolio tracker like CoinTracking is recommended for compliance
What are NFTs?
Non-Fungible Tokens (NFTs) are unique digital tokens, usually representing an asset, art piece, collectible, token, or any other digitally stored asset on the blockchain.
Are NFTs Taxable in Australia?
Yes, NFTs are taxable in Australia, following the same rules as cryptocurrencies in general, with investors facing capital gains and income tax rates. Trading/selling NFTs are treated as capital gains taxes, while earning income from creating and selling NFTs or from secondary sales falls under income taxes.
How Much Tax Do You Pay on NFTs in Australia?
Income Tax Rate
Creating and selling NFTs or earning any type of NFT income will be taxed under income taxes in Australia. Income is added to total income for the tax year, with tax rate depending on income bracket.
| Income Bracket | Tax Rate |
|---|---|
| $0 to $18,200 | 0% |
| $18,201 to $45,000 | 16% |
| $45,001 to $135,000 | 30% |
| $135,001 to $190,000 | 37% |
| $190,001+ | 45% |
Capital Gains Rate
Gains from trading NFTs are subject to capital gains tax in Australia. These gains are added to taxable income with tax rate depending on total income for the year. However, holding NFTs for over one year qualifies for a 50% discount on gains — only 50% of gains count as taxable income.
What Records Should You Keep of Your NFT Transactions?
The ATO requires NFT investors to keep accurate and detailed information including:
- Sales proceeds
- Cost basis (Fair Market Value at purchase)
- Earned income
- Capital gains/losses
- Date of acquisition
- Date of sale
- Type of asset and purpose (identification)
- Trade info (wallet)
How to Report NFT Taxes to the ATO in Australia?
Any income and gains from NFTs must be reported to the Australian Taxation Office (ATO), either online or via paper forms using appropriate tax return sections.
Should You File Taxes Manually or Automatically?
The easiest way to track gains/losses and income from NFT activities is by using an Australian-compliant crypto tax calculator that automates the entire process.
You can choose to file NFT taxes using the government online service or using paper forms.
For Investors & Hobby NFT Creators
Investors buying and selling NFTs must calculate gains/losses on each trade, which can be cumbersome to do manually. Hobby NFT creators must determine income generated from creating and selling NFTs, with crypto tax software being the easiest and most reliable way to automate the process.
For Professional NFT Creators
Professional NFT creators will probably be classified as a business and must file specific business-related tax forms and pay business income taxes instead of personal taxes.
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How Do You Save Money on NFT Taxes in Australia?
Hold Your NFTs for the Long-Run
If you hold NFTs for over one year before selling, you qualify for a 50% discount on your gains. Only half of your NFTs gains will count towards taxable income (affecting income bracket and tax rate).
Buy NFTs with FIAT Currency
Buying NFTs with FIAT currency (e.g., Australian Dollars) is not a taxable event in Australia, so you don't have to pay capital gains taxes.
Dispose of Your NFTs in a Low-Income Year
Consider selling NFTs in a low income year, because those gains are added to taxable income. If total taxable income is low in a particular year, you'll likely fall under a lower income bracket and pay less tax on total NFT gains.
Offset Gains with NFT Losses
If you've incurred losses from trading NFTs but have gains from other crypto activities, you can reduce those gains with the NFT losses and pay less capital gains taxes.
Account for Transaction Fees
When trading (selling) NFTs, include any transaction or exchange fees in your cost basis, thus reducing your NFT gains and paying less taxes.
Special Cases for the NFT Tax in Australia
NFT Taxes for Creators
Taxes on Selling an NFT
In March 2024, John sold 1 NFT for 1 ETH (worth AUD 4K) at the time. He reported income of AUD 4K (an invoice for that sale).
Taxes on Earning Royalties on NFTs
In July 2024, John received 0.1 ETH because of a secondary sale. At that time, 1 ETH is worth AUD 3K, so he reports an income for that royalty of AUD 300 (0.1 ETH * AUD 3K).
NFT Taxes for Investors
Taxes on Buying an NFT
When investors buy an NFT with FIAT, there's no taxable event in Australia. However, when buying an NFT with another cryptocurrency, it is treated as a crypto-to-crypto trade, which is taxable.
Taxes on Selling an NFT
Selling a NFT for a cryptocurrency or FIAT is a taxable event in Australia. Buying an NFT with crypto (the same as selling a cryptocurrency for an NFT) is also a taxable event.
Example: In August 2024, John bought NFTs for 10 ETH, when 1 ETH was worth AUD 3K. John's cost base is AUD 30K. In September 2021, John sold those NFTs for 30 ETH when 1 ETH was worth AUD 3.5K. This results in total sales proceeds of AUD 105K. The capital gains on the NFT sale are AUD 75K (AUD 105K - AUD 30K).
NFT Taxes on Airdrops
If you receive an NFT as an airdrop, you need to determine the Fair Market Value (in AUD) of that asset at the moment you received it and declare it as income.
Paying Tax on Donating NFTs
Donating NFTs to a qualified charitable organization in Australia is not considered a taxable event and it might even be possible to claim a tax deduction from that donation.
Taxes on NFTs in Play-to-Earn Games
Play-to-Earn games can lead players to trade NFTs, which fall under capital gains taxes, where investors need to determine the gains/losses on each trade and add it to their taxable income. In cases where players earn NFT-derived income, they need to calculate their FMV (in AUD) and pay income taxes accordingly.
How are NFT Gas Fees Taxed?
Gas fees can be included in your cost basis, thus reducing your capital gains when having profits from NFT trading.
Losses & Worthless NFTs & Treatment of Losses
If you incur losses from NFT trading but have capital gains from other crypto or investment activities, you can use those losses to offset overall gains and reduce capital gains taxes.
Staked NFTs
Generating income from staking (crypto or NFTs) is a taxable event, falling under income taxes. You need to determine the Fair Market Value (in AUD) of the staking rewards at the time you received them and report them as income.
NFT Taxes in Other Countries
United States (US)
In the US, similarly to Australia, trading NFTs for crypto or FIAT is taxed under capital gains taxes, while creating and selling NFTs as an individual is taxed according to income tax rates.
United Kingdom (UK)
In the UK, trading NFTs is generally treated as a capital gains tax event. Your tax liability will depend on your total income for the tax year, similar to Australia.
Canada
Trading or selling NFTs is a taxable event in Canada and is subject to capital gains tax. If you're earning revenue from creating NFTs, that income is typically classified under regular income tax. However, Canadian tax law provides a potential advantage: if your NFT activity qualifies as a capital gain rather than business income, only 50% of the gain is taxable.
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Conclusion About NFT Taxes in Australia
NFTs in Australia follow the same rules as crypto, with investors facing specific reporting requirements and taxes, from capital gains to income. Trading NFTs triggers capital gains tax, while creating and selling NFTs (or deriving income from NFT-based activities) falls under personal income tax.
Investors need to track key information from these transactions, from cost basis to sales proceeds and gains/losses. Tools like CoinTracking offer a reliable solution with automated tracking and ATO-ready reports, helping you easily stay on top of your NFT taxes each season.
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The information provided in this article is for educational and informational purposes only. It is not intended as financial, investment, tax, or legal advice. Cryptocurrency investments are highly volatile and carry significant risks. Before investing in cryptocurrencies, conduct thorough research, consult with a financial advisor, and ensure you understand the risks involved. The author and publisher are not responsible for any financial losses or damages that may occur from following the information presented in this article. Always use caution and make informed decisions when dealing with cryptocurrencies.