With tax time fast approaching,cryptocurrency traders and holders should be aware of some important developments in the tax space,with the Australian Tax Office (ATO) putting its laser eyes on crypto trades this year.
The ATO is on four key areas for tax time 2022. And capital gains or losses from crypto assets are very much on the list. Here’s what you should know.
With tax time fast approaching,cryptocurrency traders and holders should be aware of some important developments in the tax space.AP
While most people understand that changing crypto into Australian dollars needs to be reported to the ATO (whether it is a profit or loss),most people don’t know if you use one crypto to buy another crypto,that too needs to be reported to the ATO. In fact,every time you do this,it needs to be reported.
Danny Talwar is head of tax at Koinly,which sells software that tracks all of your crypto trades and,at the end of the financial year,works out what you owe to the ATO.
“A lot of people frequently trade between cryptocurrencies. So for example,they might trade from Bitcoin into stablecoins,and then they might transfer stablecoins into other crypto assets as well,” says Talwar. Doing this,he says,is a taxable event.
The Australian Taxation Office (ATO) has vowed to crack down on landlords submitting dodgy tax returns after a recent review found nine in 10 made mistakes and wrongfully claimed expenses.
“It’s not just selling out for fiat that is a taxable event. There is crypto to crypto,but also if you’re,you can earn income. This is subject to tax.”
So does the ATO know what we are doing with our crypto? The answer is yes. “Blockchains are inherently traceable. So you can trace the interactions with your wallets and it is also worth noting that exchanges are required to give information to the ATO,” he says.
When Australians sign up to a crypto exchange,they are required to provide identification through a process called Know Your Customer (KYC). Talwar says that this KYC process often links exchange accounts to people’s IDs.
And Talwar says that the ATO do understand crypto and are all over it. “They’re definitely making efforts to release guidelines. Back in 2014,guidance was first released on cryptocurrency. And recently,they have called out crypto as a focus area in terms of making sure people declare cryptocurrency gains,so it’s definitely something they’re focusing on.”
So what would Talwar’s advice be? The responsibility lies with crypto enthusiasts,who need to make sure they’re properly disclosing any gains they’ve made to the ATO. “Crypto is like any other asset. So,make sure you’re on top of that. Using accountants would really help for people that hold crypto,particularly if investors are kind of new to dealing with taxes.”
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