For those investors that own digital coins like bitcoin, litecoin, etc., you can’t get away from paying your tax bill. Learn how the ATO is going to hunt you down.
Don’t think that winning the game of “hide and seek” will keep you from paying taxes, and this message is for all those Aussies holding some investment in cryptocurrency. Recently the Australian Taxation Office announced that they have extended the partnership with cryptocurrency exchanges of Australia and demanded to provide the trading database until 2022-23.
It is a major part of a campaign run by the ATO. They will smash the myth of having cryptocurrency gains without paying taxes or taxable when investments are drawn into Australian dollars. This partnership with exchanges is going to help in targeting potential taxpayers.
Tim Loh, The ATO assistant commissioner, warned Australian people that they could not fool around with crypto investments when the exchanges are providing amazing data-matching abilities. He said, “this way, people are going to comply with the tax obligations associated with cryptocurrency.”
Over the last year, the prices of cryptocurrency have skyrocketed. For instance, bitcoin was worth around $14000 in June 2020, but in April, it touched $60,000, it came down to $35000. ATO understands that people will invest in cryptocurrency in the future, and they want to ensure that every crypto investor understands their tax obligations.
According to recent statistics, over 550000 taxpayers are likely to receive a message when they cash back their holdings.
ATO will remind those Aussies with cryptocurrency holdings through a pop-up message to register for tax returns under the myTax portal. They will send out the message to your registered tax agent to remind them to add gains and losses in cryptocurrency. However, in some cases, they will use a data-matching system to get information regarding a particular taxpayer among adults.
Information Required By ATO
The ATO keeps a close track with financial institutions, data from banks, and cryptocurrency exchanges where cryptocurrency flows into the real world. According to Mr. Loh, cryptocurrency is like investing in other assets such as shares, which means it is vital for you to keep a good record of measuring profits and losses.
The information will include buying and selling cryptocurrency, amount of Australian dollars, date of transactions, type of transaction, and which parties are involved.
Also, there is some amazing accounting software that can help determine the actual gains and losses in cryptocurrency, while registered tax agents also assure people about this. The ATO will be asking Aussies with cryptocurrency assets to review their last lodged returns.
According To The Tax Expert
As you already know, determining the gains and losses in cryptocurrency can be a challenging task due to its wide fluctuations in value. That means if you do not consider cryptocurrency as your personal asset, any disposal you make will be declared for CGT (capital gains tax). However, you might be eligible for a CGT discount in case the asset is held for over one year before the disposal.
The ATO has outlined that cryptocurrency is considered a personal asset as long as you acquire and exchange it within a short time.
But in most cases, cryptocurrency is not a personal asset, which means you will be entitled to capital gains. Also, crypto investors should keep a solid record of transaction values and dates and be alert about rising capital gains tax even when they haven’t cashed back their holding into recognized currency.
A key factor is to keep the investment in cryptocurrency for the long term. You would get a 50% CGT discount on previous gains.
Why The Australian Exchanges And The ATO Working Jointly
The chief executive of BTC markets, Caroline bowler, said working alongside government organizations like AUSTRAC, ATO, etc., is a part of executing healthy business with Australian companies. As you already know, the tax requirements on cryptocurrency are still complicated. So the ATO has released a fact sheet to assist cryptocurrency investors in knowing their tax obligations.