Don’t forget, the Australian Tax Office wants to tax your cryptocurrency
The Australian Tax Office recently declared its intention to target crypto traders who are avoiding paying the proper amount of tax.
This wasn’t a problem two years ago when crypto wasn’t recognised as a valid form of currency, but that changed towards the end of 2017.
And this year the ATO is cracking down even harder.
The ATO revealed back in May that it will be asking Australian cryptocurrency service providers to hand over their records, which will then be checked against tax returns.
“The ATO uses third-party data to improve the integrity of the tax system by identifying taxpayers who fail to disclose their income details correctly. We also use third-party data to assist taxpayers in meeting their tax obligations through pre-filing of tax returns,” ATO deputy commissioner Will Day said in a press release at the time.
“We want to help taxpayers to get it right and ensure they are paying the correct amount of tax. Where people find that they have made an error or omission in their tax return they should contact the ATO as soon as possible. Penalties may be significantly reduced in circumstances where we are contacted prior to an audit.”
If a discrepancy is found between your tax return and the data-matching records, you may be contacted by the ATO. You will then have 28 days to explain or clarify the discrepancy.
Firstly, make sure that you accurately declare your crypto earnings when you’re doing your taxes.
And in case of an audit, keep copies of all your cryptocurrency trade transactions in Australian dollars.
It’s worth noting that the ATO considers cryptocurrency as property and that any financial gains from selling it will generally be subjected to capital gains tax (CGT) and must be reported to the ATO.
Speaking to Gizmodo Australia the ATO also stated:
“If the transactions amount to a profit-making undertaking or plan then the profits on disposal of the bitcoin will be assessable as ordinary income. Where cryptocurrency is acquired and used within a short period of time, to enter directly into transactions to acquire items for personal use or consumption, the cryptocurrency is more likely to be a personal use asset.”
However, where the cryptocurrency is acquired and held for some time before any such transactions are made, or only a small proportion of the cryptocurrency acquired is used to make such transactions, it is less likely that the cryptocurrency is a personal use asset. In those situations it is more likely to be held for some other purpose, such as:
Except in rare situations, the cryptocurrency will not be a personal use asset: when you have to exchange your cryptocurrency to Australian dollars (or to a different cryptocurrency) in order to purchase items for personal use or consumption, or if you have to use a payment gateway or other bill payment intermediary to purchase or acquire the items on your behalf (rather than purchasing or acquiring directly with your cryptocurrency).”
The federal government also created new legislation in 2017 that prevented cryptocurrency from being double taxed due to GST.