The Use of Cryptocurrency in the Property Market

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Do you invest in cryptocurrency? According to Domain, a growing number of home buyers are investing in cryptocurrency as a way to get into the booming market. It is becoming more common for buyers to use cryptocurrency either for a deposit or to pay off a portion of their existing mortgages. 

Though digital coins have not been recognised as a mainstream currency in Australia, it has grown in popularity, and its value has surged drastically, especially Bitcoin (it’s currently worth over $45,000). Millions of investors, including Australian home buyers, are wanting to cash in on the digital coin market as there’re now more than 4000 cryptocurrencies circulating in existence. 

While it is a fascinating market to invest in, mortgage brokers across Australia warn that using such digital currency can have certain risks as this market is extremely volatile.  One day the cryptocurrency value is increasing, the next minute, it drops in double digits and strips thousands from people’s investments as a result. 

On top of that, given its unpredictable nature and infancy stage in terms of regulations, banks are hesitant to consider cryptocurrency as a viable currency on savings. This means it can't be considered as part of the homebuyer’s overall savings/finances at this stage. Crypto trading platforms also don’t provide enough proof of investor’s holdings, so it won’t be considered as a financial asset either.

A lot of crypto investors assume that because it is a cryptocurrency and it is anonymous, the tax on its gains doesn’t exist. However, according to ATO, if you’ve experienced large gains in cryptocurrency, they will be treated similarly to gains from other investments like shares. As an investor, if you buy, sell, or swap for regular currency, it will be subjected to capital gains tax. As you lodge your 2021 tax return, make sure to report your capital gains or losses. ATO will also be matching data from cryptocurrency service providers to individuals’ tax returns. 

Follow this link to find a useful checklist on how capital gains tax applies to crypto-trading. 

In the coming years, it is believed that using cryptocurrency as part of the deposit or repayments on a mortgage loan will become the new normal. If you have any questions about what this could mean for you as a property investor or a first home buyer, speak to one of our mortgage brokers.

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