Nick Bruining: How cryptocurrency gains are about to affect your age pension and other Centrelink benefits

As many cryptocurrencies hit all-time highs, uncertainty over how various government departments treat these assets could leave some traders and others exposed if Centrelink or the Australian Taxation Office ever come knocking.

And there’s a good chance they might.

The ATO has announced that for 2025-2026, it will get its hands on crypto trading and asset data covering up to 1.2 million Australians and their tax structures — including private companies and trusts.

An incorrect assumption that regulators view cryptocurrency in the same way fans do is likely to land many players in hot water.

As a starting point, cryptocurrencies are not recognised as currencies and are generally not regarded as a financial asset by Services Australia, the parent organisation of Centrelink.

The upside is that — unlike shares, bank accounts, pension funds and bullion — it is not captured by Centrelink’s complicated deeming system, which is used to calculate entitlements under the income means test.

The only exception to this rule is if you have crypto as part of a self-managed superannuation fund arrangement. In this case, the value is included as part of the total SMSF balance, which in turn is regarded as a financial asset and subject to deeming.

Things get messy under the asset means test.

Because crypto falls under the category of “other asset”, Services Australia must be notified of a change in value of more than $1000 within 14 days of the change. While, on the upside, that could see an asset-tested part-pensioner pick up an extra $3 a fortnight for a $1000 fall in value, the reverse applies if there has been an increase.

It becomes even more important for someone receiving an allowance like JobSeeker.

Unlike the age pension asset test — which reduces your payments once you exceed the means test thresholds — an allowance recipient has their benefit completely cancelled once the limits are exceeded by even $1. For a home-owning single, this limit is $321,500. A non-homeowner is allowed an additional $258,000, or $579,500 in total.

The issue is that if at some time in the future Services Australia becomes aware you weren’t entitled to any or a reduced Centrelink payment because your assets were higher than you advised for a particular period, it is legally obliged to recover the overpaid money.

And Services Australia specifically makes the point that it can, and does, access data obtained by the ATO.

The ATO deals with crypto in the same way as any other capital asset. If you buy and sell crypto within 12 months and make a profit, the full profit forms part of your taxable income for the year. If held for 12 months or more, the 50 per cent discount can be applied, and only 50 per cent of the profit is taxable.

And while one of the original appealing aspects was the anonymity of trading in crypto, that’s no longer the case.

Any crypto trading business that deals with Aussies can be compelled by the ATO to provide the trading data.

The identification data now required by crypto platforms to set up or operate your trading account is used to link the trading data with your ATO records and, potentially, the Services Australia data.

While there’s no publicly available information on how many people have been caught so far, one suspects it’s only a matter of time before someone ends up in the public spotlight of a court appearance for undeclared crypto dealings.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association