Losing money in crypto is never pleasant, but it might come with a silver lining at tax time. In Australia, the ATO allows certain crypto losses to be written off against your capital gains, which can lower your overall tax bill. However, not all losses qualify. Whether your tokens were stolen, lost in a scam, or became worthless after a rug pull, each situation is treated differently under ATO rules.
This guide walks you through the key crypto loss scenarios in 2025, what you can legally claim as a deduction, and how to stay compliant while filing. From recognising disposal events to understanding the difference between realised and unrealised losses, we’ve covered everything you need to know to handle your crypto setbacks the smart way.
Can You Write Off Crypto Losses in Australia?
Yes, but only under specific conditions. In Australia, the ATO allows you to claim capital losses from crypto if you’ve disposed of the asset and it was held as an investment. This means you must have sold, swapped, gifted, or otherwise disposed of the crypto at a value lower than what you paid for it. These losses can then be used to offset any capital gains made in the same financial year or carried forward to offset future gains.
However, you cannot claim a capital loss for coins or tokens whose value has dropped unless you’ve taken a disposal action. The ATO also requires clear documentation for all disposals, including the date, amount received, and how the loss occurred.
Read More: Ultimate Guide on Crypto Taxes in Australia
Is Lost or Stolen Crypto a Capital Loss?
Losing access to your crypto due to scams or theft can be devastating. Fortunately, in certain situations, the ATO allows you to claim such incidents as capital losses, but only if strict evidence criteria are met.
When Is Staking Taxed in Ireland?
Staking is taxed at the time you receive the rewards, not when you sell them later. The value of the tokens in EUR at the moment they hit your wallet is treated as your income. This valuation forms the basis of your Income Tax liability, even if the market price later changes.
What the ATO Considers As Scam or Theft?
If your crypto is stolen through a phishing attack, exchange hack, or scam, the ATO may consider this a capital loss if the asset is proven to be permanently irrecoverable. However, if there is any realistic chance of recovery—such as an exchange offering reimbursement—you may not be able to claim the loss immediately.
To support your claim, you’ll need comprehensive documentation, including:
- The date you lost access to the crypto
- The wallet address containing the lost assets
- Proof that you owned the wallet and its private key
- Original purchase records showing acquisition cost
- Transaction records linking the wallet to your exchange account
- Evidence of the loss event (e.g. police report, scam email, legal case)
Example
You connect your wallet to a malicious dApp that drains your funds. You report the scam and gather wallet logs, transaction IDs, and screenshots confirming your identity and the event. Since the crypto is permanently lost with no recovery plan, and you’ve documented the incident thoroughly, the ATO is likely to accept this as a valid capital loss claim.
Rug Pulls and Worthless Token Scenarios
Not all crypto losses are the result of theft. Many stems from market manipulation or sudden collapses in token value. In these cases, simply holding a worthless token does not qualify for a capital loss. You must actively dispose of the asset for the ATO to accept it.
When a Token Becomes Worthless?
Rug pulls occur when token creators artificially inflate the price and then exit with investor funds, leaving behind a token with no liquidity or value. Similarly, legitimate projects may fail, causing tokens to plummet without warning. In both situations, you still technically own the tokens, which means you haven’t yet “realised” the loss.
To realise the loss and claim it on your taxes, you must dispose of the token through one of the following methods:
- Selling on an exchange (even for a negligible amount)
- Swapping the token for another crypto asset
- Gifting the token to another wallet
- Burning the token by sending it to an unrecoverable address
These actions trigger a disposal event, making the loss eligible for capital loss reporting.
Example
You invested in a trending meme token that was later exposed as a rug pull. The token’s value dropped to nearly zero, and it’s no longer traded on major exchanges. You decide to send the remaining tokens to a known burn address. This irreversible action is treated as a disposal, allowing you to realise your capital loss and offset it against your gains for the financial year.
Crypto Platform Collapses and Bankruptcy Events
Another scenario where crypto investors may face significant losses is when an exchange or platform collapses or declares bankruptcy. While such events often lock users out of their funds, the ATO has specific guidelines on when these losses become eligible for tax write-offs.
How Platform Failures Are Treated by the ATO?
If a platform halts withdrawals due to insolvency, it does not immediately qualify as a capital loss. According to the ATO, a capital loss can only be claimed once the administration or liquidation process is finalised and it becomes clear that your crypto assets are unrecoverable.
In the meantime, you are expected to monitor proceedings and retain all documentation that shows:
- Your wallet balances at the time of collapse
- Proof of platform registration and your account details
- Communications or public announcements confirming insolvency or suspended services
- Updates from liquidation or reimbursement plans
Even if partial reimbursements occur later, you may be able to claim the unrecovered portion as a capital loss.
Example
You had holdings on a centralised exchange that suddenly halted operations due to insolvency. At first, you couldn’t withdraw funds, but liquidation proceedings were ongoing. After several months, the platform reimbursed only 25% of your holdings. With the process now complete and unreimbursed funds confirmed, you calculate the total loss and claim a capital loss for the remaining 75% on your tax return, using records of the original investment and the shortfall.
How to Legally Claim Crypto Losses in Australia?
When claiming crypto losses in Australia, it’s not just about identifying a loss—it’s about proving and timing it correctly. The ATO only allows capital losses from disposals of crypto held as investments. If you’re looking to reduce your tax liability legally, you must follow strict compliance steps and maintain proper documentation.
Disposal Must Occur Before 30 June
To claim a capital loss for the financial year, you must dispose of the crypto asset before 30 June. This is the end of the Australian tax year. Disposal refers to any event where ownership is relinquished, such as:
- Selling the asset
- Swapping it for another token
- Gifting it to someone
- Burning the token (sending to an irrecoverable address)
If the disposal happens after 30 June, the loss can only be applied to the next year’s return.
Loss Must Be Realised, Not Just Theoretical
Losses are only deductible once realised. If your token has dropped in value but you still hold it, you cannot claim the loss. You must complete a disposal event, even for worthless tokens, to trigger the capital loss.
For example, if you’re holding a failed meme coin that has no liquidity, you might need to send it to a burn address or gift it to realise the loss legally.
Must Hold the Asset as an Investment
Crypto losses are only claimable if the ATO recognises that you held the asset for investment purposes. If you’re classified as a trader or hobbyist, different rules apply. Investors can offset capital losses against capital gains; traders, on the other hand, might claim losses as business deductions under separate rules.
Accurate Records Are Mandatory
The ATO will require clear documentation, including:
- Original purchase receipts
- Transaction history showing acquisition and disposal
- Wallet addresses involved
- AUD value of the asset at both acquisition and disposal
- Details of the disposal method (sale, swap, gift, etc.)
Failure to provide complete records may lead to rejected claims or ATO audits.
Read More: Crypto Accounting Methods in 2025
How KoinX Helps You Track and Report Crypto Losses?
Losing money in crypto can be frustrating enough—but what’s worse is missing the chance to claim those losses on your tax return. Many investors fail to realise that accurate reporting of losses can reduce their tax burden significantly. This is where KoinX makes the process easy, reliable, and ATO-compliant.
Smart Tracking for Capital Loss Events
KoinX automatically identifies when a disposal event has occurred—whether it’s through a trade, burn, gift, or swap. It categorises losses separately from gains and marks transactions with a timestamp for better clarity. You’ll never miss a deductible event again.
Tracks Losses From Theft, Scams, and Exchange Collapses
Have you been affected by a rug pull or platform shutdown? KoinX enables you to manually mark assets lost to scams or theft and helps generate supporting documentation. This includes wallet address histories, cost base, and details on irrecoverable losses to support your ATO claim.
Generates CGT Reports With Net Gains and Losses
KoinX provides clear, concise Capital Gains Tax reports that factor in all realised gains and losses. You can download these in formats compatible with myTax or share them with your accountant. Losses are itemised, and the net position is clearly stated.
Converts All Values to AUD Automatically
Since the ATO requires reporting in Australian dollars, KoinX uses historical pricing to convert every transaction to AUD at the exact time of the event. This eliminates the risk of exchange rate errors and ensures your loss calculations are precise.
Clean Documentation for Future Audits
KoinX organises all relevant details like transaction history, acquisition costs, wallet proofs, and timestamps into clean, audit-ready reports. If the ATO ever requests more information, you’ll have every document you need at your fingertips.
Sign up on KoinX today and make crypto loss reporting simple, accurate, and stress-free for the 2025 tax season.
Conclusion
Crypto investments carry risks, and losses, whether due to market crashes, scams, or platform collapses, can be painful. But the good news is, you can often claim these losses on your Australian tax return and reduce your capital gains liability. The key is knowing what counts as a deductible loss and having the right tools and documentation to report it correctly.
If you’re unsure where to begin or worried about missing something, platforms like KoinX can help you track, calculate, and report your crypto losses with complete confidence. Join KoinX today to simplify your tax reporting and maximise your write-offs this financial year.
Frequently Asked Questions
Can I Claim a Capital Loss If My Tokens Became Worthless But I Still Own Them?
No, simply holding worthless tokens doesn’t qualify as a capital loss. You must dispose of them through a swap, sale, gift, or burn transaction. This “realisation event” is required by the ATO to claim the loss on your tax return, even if the tokens are no longer valuable.
What Proof Do I Need to Claim a Loss From a Scam?
You’ll need evidence like wallet addresses, transaction history, police reports, and proof of ownership. The ATO also expects details showing the loss is permanent and unrecoverable. Proper documentation increases your chances of a successful deduction claim.
Can I Claim a Capital Loss for Funds Locked in a Suspended Exchange?
Not immediately. If the platform is undergoing bankruptcy or administration, you must wait until proceedings are finalised. Only then can unrecovered funds be claimed as capital losses, based on the portion that is deemed irretrievable.
Are NFT Losses Treated Differently From Regular Crypto Losses?
The tax treatment is similar, but if you earn royalties or create NFTs, those earnings may be classified as income. If NFTs lose value, disposal is still required to realise a loss, just like with fungible crypto. Keeping accurate records is essential for both.
Can I Carry Forward My Crypto Capital Losses to Future Years?
Yes, crypto capital losses that exceed your gains in the current year can be carried forward indefinitely in Australia. You can apply them to future gains, but you must report them in the year they occurred to claim them later.
