Crypto goes missing in plenty of ways. Forgotten seed phrases. A phishing site that drained the wallet. Rug pull on a token you bought at launch. NFT marketplace exploit. Exchange collapse. The financial damage is the headline, but the tax position can soften it materially.

The ATO has published two relevant guidance pages, both updated in 2025: "Loss or theft of crypto assets" and "Crypto exchanges and platforms under administration". They cover most scenarios Australian investors actually encounter, and the answer is often "yes, you can claim a capital loss", provided you can prove ownership and the asset is genuinely irrecoverable.

Here's the FY26 framework, with the situations the ATO accepts, the situations it doesn't, and the evidence you need either way.

The general principle

Under the ATO's loss or theft of crypto assets guidance, you can claim a capital loss on crypto you have lost or had stolen if:

1. You can demonstrate ownership of the crypto.
2. The asset is genuinely irrecoverable (you can't replace it or get it back).
3. You can use that capital loss to reduce other capital gains, with the excess carried forward indefinitely.

You cannot use a crypto capital loss to offset ordinary income. The loss only reduces capital gains.

If you later receive any compensation or insurance payment, you must reduce your capital loss by the amount received. If the compensation exceeds your original cost base, the excess is a capital gain.

Scenarios the ATO accepts

Lost private keys. If you have lost access to a wallet because the private key or seed phrase is gone and unrecoverable, this qualifies as a loss. Evidence required includes the original transaction records showing you acquired the crypto, the wallet address, and a contemporaneous record that you no longer have access.

Stolen crypto. Phishing, hacks, drained wallets, compromised exchange accounts. If you can prove ownership and the theft, you can claim a capital loss. Evidence includes police reports, exchange notifications, on-chain transaction records showing the unauthorised outgoing transfer, and where applicable, communications with the exchange or platform.

Crypto sent to the wrong address or a burn address. Treated as lost if the destination is irrecoverable. Evidence is straightforward: on-chain proof of the outgoing transaction plus a documented case for irrecoverability.

Rug pulls and scam tokens. If a token has effectively zero value because the project has been abandoned, the liquidity pulled, or the smart contract is non-functional, you can usually claim a capital loss. The cleanest mechanism is to dispose of the worthless token for a nominal amount on an exchange that still lists it, which creates a clear CGT event. Where that is not possible (token delisted everywhere), document the project's collapse with on-chain evidence and contemporaneous reporting.

NFT exploits and platform hacks. Treated the same as stolen crypto. Evidence requirements are the same: ownership records plus theft proof.

Scenarios where it is more complicated

Crypto held on an exchange in external administration. This is where the ATO's position firmed up materially with the September 2025 guidance update.

If your crypto is sitting on an exchange that has entered voluntary administration, restructuring, or liquidation (FTX Australia, BlockFi, Celsius, and others), you cannot claim a capital loss when administration starts. The CGT event happens when administration is finalised, and you calculate the loss based on the distribution you actually receive against your original cost base.

The ATO's exchanges and platforms under administration guidance gives a worked example. An investor with $12,000 invested in an exchange that goes into administration and pays out 35 cents on the dollar (against the value at the date of administration) crystallises a capital loss when the administration concludes, calculated as cost base minus distribution received.

Practically, this means FTX Australia customers (administration commenced 11 November 2022 with KordaMentha as administrators) only crystallise their capital loss as the administration finalises. Mt Gox creditors are still waiting on distributions after more than a decade. Until administration concludes for your specific exchange, you cannot lodge the loss.

Worthless tokens still held in your wallet. A token that has crashed to fractions of a cent but is still technically tradeable does not give rise to a capital loss until you dispose of it. The cleanest path is to sell the position even at a near-zero price, which crystallises the loss. The ATO does not recognise paper losses on assets you still hold.

Crypto you can technically still recover but choose not to. If access is theoretically possible (your hardware wallet is in a safe you have access to, you just haven't set it up), the asset is not lost. The ATO position is that you must be unable to recover it, not unwilling.

The evidence the ATO wants

Whatever the scenario, the evidence requirements scale with the size of the claim. At minimum:

• Original acquisition records: exchange statements, transaction confirmations, AUD cost base at acquisition.
• Wallet addresses involved, with on-chain records.
• Documentation of the loss event: police reports for theft, screenshots of phishing sites, exchange communications, project abandonment evidence for rug pulls.
• Insurance or compensation correspondence, including any amounts received.
• Contemporaneous records, not reconstructed years later.

For exchange administrations, additional evidence includes the administrator's notices and distribution statements when issued.

The ATO retains records of crypto activity through its data-matching program, so reported losses are reconciled against the agency's view of your exchange activity. Claims that do not match the underlying transactions trigger review.

How Summ handles lost, stolen and hacked crypto

In the Summ app, transactions can be categorised as lost, stolen, or ignore out.

Lost and stolen categorisations trigger a capital loss event at a sale price of zero, reflected in your CGT calculation for the year.

Ignore out removes the transaction from taxable value calculations entirely, which is the correct treatment when the asset is sitting on an exchange in administration and the loss has not yet crystallised, or when professional advice indicates the loss isn't claimable under your specific circumstances.

For exchange administration scenarios, the best practice is to leave the original position visible in your records so the cost base is preserved, and only trigger the loss event once administration finalises and the distribution amount is known.

Where the position is uncertain, the conservative approach is to retain the records, mark the transactions appropriately, and consult a registered tax agent with crypto experience before lodging.

The compliant path

1. Reconstruct the evidence trail. Acquisition records, on-chain transaction history, loss event documentation. The ATO needs to see it, not just hear about it.
2. Determine the correct category. Lost, stolen, scam/rug pull, exchange administration. Each has different timing and treatment.
3. Do not claim before the CGT event. For exchange collapses in particular, the loss only crystallises when administration concludes.
4. Reduce by any compensation received. Insurance, exchange refunds, partial distributions. These affect the final loss amount.
5. Lodge by 31 October 2026 for individuals self-preparing, or via a registered tax agent under their concessional deadline.

Summ handles the parcel-level CGT tracking, applies the correct lost/stolen categorisation, and produces an ATO-formatted report ready for lodgment via myTax or your accountant. The definitive 2026 Australian crypto tax guide covers the broader rules.

Generate a free preview to see your current position.

This article is general information, not tax advice. Material losses are worth professional advice, particularly where exchange administration is involved.