The Australian Tax Office is Hunting for Cryptocurrency Traders to Report and Pay their Taxes
According to The Financial Review, The Australian Tax Office (ATO) is warning cryptocurrency traders that their profits from cryptocurrency trading in 2017 to 2018 will “not go unnoticed.”
ATO Explains Cryptocurrency Investing
The ATO has provided a very detailed and comprehensive information for Australian citizens when it comes to cryptocurrency investments.
The Financial Review is certain that any cryptocurrency trader has at a minimum doubled their holdings since July 2017 even while the cryptocurrency value is at its low point in the past 12 months.Blockchain research company Chainalysis stated that “many longer-term holders sold at least $30 billion worth of Bitcoin to new speculators over the December to April period, with half of this movement taking place in December alone.”
The ATO mentioned on their website:
“If you are involved in acquiring or disposing of cryptocurrency, you need to be aware of the tax consequences. These vary depending on the nature of your circumstances. Everybody involved in acquiring or disposing of cryptocurrency needs to keep records in relation to their cryptocurrency transactions.”
Chainalysis’s report however only looks at Bitcoin. The cryptocurrency industry has thousands of other popular and alternative coins which is equal to many more billions of dollars for the ATO to chase up on.
Liz Russell, a senior tax agent at Etax.com.au encourages cryptocurrency traders to understand how the ATO classifies cryptocurrencies since it has a direct impact on how cryptocurrencies will be taxed. While there is a lot of debate over whether a cryptocurrency is an asset, currency, or even a collectible, the ATO classifies cryptocurrencies as assets. Cryptocurrencies, therefore, face the same capital gains tax provisions that are seen in real estate assets and shares.
ATO has hundreds of data sources to find cryptocurrency traders
Russell also mentioned that while cryptocurrencies are seen as an anonymous payment system, the ATO has “hundreds of data sources,” to track the payments down once it has been converted into a fiat currency. The conversion to fiat currency is considered as a capital gain by the Tax Office.
For example, if a cryptocurrency trader purchased $5,000 worth of XEM tokens and then traded it for $8,500, the $3,500 profit the trader has gained is seen as a capital gain. Traders will need to add the gains to their income for the financial year, like the gains they would make on selling investment property or shares.
However, if cryptocurrency traders made a loss of trading last year, it’s also considered as a write-off. If the cryptocurrency trader in the earlier example made a loss of $3,000 on a token but gained $4,000 for another coin, the trader’s net capital gain is $1,000. When it comes to these transactions no cost of goods is payable when it comes to disposing of cryptocurrencies.
