ATO Warns Bitcoin and Other Cryptocurrency Investors Can’t Avoid Paying tax
ATO (Australian Taxation Office) has recently announced that no cryptocurrency investor can play the hide and seek game to avoid tax. According to the official “The Australian” figures, about 17% of Australians own cryptocurrency. Some of them think that they can ignore tax obligations because of the anonymity of the digital currency. The assistant commissioner of ATO, Tim Loh said that this news alarmed the ATO office. Resultantly, the ATO extended its partnership with cryptocurrency exchanges in Australia and instructed them to provide their official trading data by 2022-2023.
ATO Campaign Regarding Cryptocurrency Investors
One of the most important goals of the ATO campaign is to clear up the misunderstanding that the profit earned by cryptocurrency is tax-free. Many people believe that cryptocurrency gains are only taxable when they’re converted into Australian dollars. But that’s not actually the case and ATO has clearly mentioned that all the cryptocurrency holdings are taxable just like other types of assets. Moreover, the partnership with Australian crypto exchanges will help the ATO target taxpayers.
Tim Loh warned the Aussie crypto investors that it’s no longer a game of “hide and seek”. That’s because the crypto exchanges have the capability to offer excellent data matching. Collecting data is the best way to make sure that people follow the law and pay their taxes regarding cryptocurrency. It’s important to note that most cryptocurrencies have skyrocketed over the course of the last 12-18 months.
For example, the price of Bitcoin was about 13,000 Australian dollars in June 2020 and it reached more than 86,000 Australian dollars in May 2021. Currently, it’s somewhere around 40,000 Australian dollars. Because of the high price fluctuation, it’s almost certain that more and more people will invest in cryptocurrency to earn massive gains in a short time. That’s why ATO wants to make sure that all Australian cryptocurrency investors must know their tax obligations.
Tim Loh also mentioned that the ATO will send the pop-up message to about 550,000 taxpayers. It will remind them about adding the information regarding their cryptocurrency losses and gains while lodging tax returns by using the myTax portal. Moreover, people who don’t use the myTax portal will be informed through their registered tax agents. In some circumstances, the ATO will match the data provided by the exchanges to select taxpayers for audits if there are egregious behaviours.
The Information that ATO Required from Cryptocurrency Investors
The assistant commissioner of ATO said that the office closely monitors all the bridges of cryptocurrency interactions with the real world. It uses the data provided by cryptocurrency exchanges, financial institutions, and banks.
The digital currency such as Bitcoin is just like other assets in which people invest and it’s critical for the investors to record their losses and gains data. This data includes the purpose of transactions, dates of transactions, the amount in Australian dollars while buying, selling, or swapping cryptocurrency, and the details of any other party (if involved).
Mr. Loh also said that there are many accounting software solutions out there that people can use to record the required data. He added that people can also get help from their registered tax agents to make sure that they provide their cryptocurrency losses and gains while lodging their tax returns. This year the Australian Taxation Office is expected to write to about 100,000 taxpayers to review their already lodged tax returns in order to include data regarding cryptocurrency assets.
Reviews of Tax Experts
Dealing with cryptocurrency can be a very challenging task because of the dramatic price fluctuations. Moreover, because of thousands of cryptocurrencies available in the market, crypto assets also need to be categorised in multiple ways.
Mardi Heinrich Reviews
The KPMG tax partner, Mardi Heinrich says that the ATO can closely monitor the cryptocurrency transactions by working with data providers. That’s why it’s easy for the institute to target digital currency tax dodgers.
She also said if a person’s cryptocurrency isn’t considered to be his/her personal use asset, then s/he generally need to declare any disposal for CGT (capital gains tax) purposes. This way, the crypto owner might be eligible to get the capital gains tax discount if s/he has held the crypto asset for at least one year before disposing of it.
According to Mardi, it’s important to keep in mind that ATO has outlined that if a person acquires and uses the digital currency during a short period and exchanges it for personal use item(s), then it will be considered a personal use asset. Mostly, the cryptocurrency is subject to capital gains and not considered a personal use asset. Therefore, the longer a person holds his/her digital currency, the less likely it will be considered a personal use asset.
Mardi recommends that crypto investors should retain a solid transaction record with all the important details. She also warns that the CGT event can take place if a person transfers his/her cryptocurrency even if it’s not converted into Australian dollars.
Tax Accountants Moore Australia Reviews
The tax accountants Moore Australia suggest that most people will hold their digital currency as a CGT asset. They said that the intention to make a long-term investment in cryptocurrencies is the key characteristic. For example, a person will receive the CGT discount of 50% on the subsequent gain. if s/he holds his cryptocurrency for more than 12 months.
Why Australian Crypto Exchanges are Cooperating
Caroline Bowler, who is the chief executive of one of the largest Australian crypto exchanges (BTC Markets) said that working with the government institutions such as AUSTRAC and ATO is normal for any renowned Australian company. When it comes to the crypto exchanges then the mechanism is just the same that the Australian financial institutions and banks follow. She also said that working with government institutes only shows the maturity of the Australian crypto sector which is a great sign.
However, she also said that the tax requirements by ATO are a little complex. She was also contacted by ATO and she declared all her crypto gains and losses to ensure that her taxes are up to date. In order to help investors to understand their crypto tax obligations, the ATO has released a fact sheet publicly that any person can use.
Written by The Original PC Doctor on 27/07/2021.