The Australian Tax Office (ATO) has cast a wide net to investigate crypto investors after classifying cryptocurrencies like bitcoin as ‘assets’ liable for capital gains taxes.
Earlier this year, the ATO published its guidance on the tax treatment of cryptocurrencies. Highlighting bitcoin as an example, the authority said it viewed cryptocurrencies as neither money nor foreign currency but a property deemed an ‘asset’ for capital gains taxes (CGT).
“That means it’s subject to the same CGT provisions that apply to real estate and shares,” confirmed Liz Russell, a senior tax agent at a private online tax filing service. In revealing further insights on the ATO’s taxation policies, the tax expert stressed the authority also considers profits made from crypto-cash trades as capital gains.
In essence, a bitcoin bought for $2,000 at one point in 2017 and sold for $19,000 near its all-time highs in late 2017 would see the $17,000 profit taxable for capital gains and will required to be added as an ‘assessable income for the financial year’.
Inversely, any losses from crypto trading can be written off from the overall CGT tax filing that could include sale of shares or a property.
On the flip-side, crypto investors and adopters can avoid paying capital taxes on gains by spending their cryptocurrency in point-of-sale locations and retail establishments like those in Australia’s first ‘digital currency town’, according to the tax expert. “For these sorts of transactions, no CGT is payable when disposing of cryptocurrency,” Russel told Business Insider AU.
As reported previously, the ATO mandated cryptocurrency investors and adopters to maintain records for all cryptocurrency transactions. Required details include the date of the cryptocurrency transaction, its value in Australian dollars and the purpose of the transaction alongside the recipient’s wallet details.
“It does not matter how many exchange transactions you undertake,” an excerpt from the ATO’s guidance read. “You need to undertake this process for every transaction occurring during the income year.”
The practicality of the strict record-keeping requirement was discussed in a recent community consultation. The details of the public consultation, which closed in late May, have not been revealed yet.
Meanwhile, the ATO is using a compulsory ‘100-point identification check system’ that will implement data-matching techniques to investigate cryptocurrency investors. The tax authority is also certain to benefit from new regulations that have mandated all domestic cryptocurrency exchanges to register with AUSTRAC, Australia’s financial intelligence agency and watchdog, before a deadline that passed on 14 May.
Under terms of compliance, the exchanges will also need to monitor and flag suspicious transactions as well as reporting all transactions involving cash over AUD$10,000.
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Last modified: March 4, 2021 5:09 PM