Stolen Crypto, Hacks & Rug Pulls: How to Claim a Tax Loss
There is nothing worse than logging into your wallet and seeing a balance of $0. Whether it was a phishing scam, a "rug pull" project, or an exchange collapse (like FTX), the financial pain is real.
The only silver lining is that you may be able to claim a Capital Loss to offset other gains. However, the ATO does not simply take your word for it.
1. It Must Be "Lost", Not Just "Down"
If you bought a coin for $100 and it is now worth $0.01, you haven't realized a loss yet. You must actually sell or dispose of the asset to trigger the Capital Loss event.
But what if you can't sell it because the liquidity pool is empty or the exchange is frozen? You may need to perform a "null sale" (sending the tokens to a burn address) to crystallize the loss.
2. Evidence for Stolen Crypto
If your funds were stolen, you can't sell them. To claim a loss here, you need to prove ownership and theft.
- A police report or Cyber.gov.au report reference number.
- Transaction hashes showing the unauthorized movement of funds.
- Correspondence with the exchange or wallet provider confirming the breach.
3. The "Personal Use" Trap
Be careful: If you lose crypto that was considered a "Personal Use Asset" (acquired for <$10,000 to buy goods/services), you generally cannot claim a capital loss. This is a complex area of law, and many taxpayers get it wrong.
Did you lose money in crypto this year?
We can help you compile the "Loss Evidence Pack" required by the ATO to ensure your capital loss is approved, helping you reduce your overall tax bill.
Review My Crypto LossesSummary
A capital loss is a valuable tax asset. Don't let a scammer take your money and your tax deduction. Gather your evidence now before the blockchain data becomes hard to find.