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Summary
- The Australian Tax Office (ATO) has revealed they have an extended partnership, until 2023, with cryptocurrency exchanges, requiring them to submit all their trading data.
- ATO assistant commissioner Tim Loh disclosed that over 550,000 Australians would receive a reminder when they go to submit their 2021 tax return.
- The ATO views digital currency the same as any other asset class such as shares or property and is subject to Capital Gains Tax.
With tax season now upon us, the Australian Tax Office (ATO) has warned Australian taxpayers not to attempt to hide away any profits accumulated from cryptocurrency investment or trading.
The ATO has revealed they have an extended partnership, until 2023, with cryptocurrency exchanges, requiring them to submit all their trading data. The move is being made to squash the myth prevalent in Australia that money tied up in cryptocurrency is not subject to tax.
Source: © Tanjakitura | Megapixl.com
Australians have been increasingly investing in digital currency, and the price of crypto has increased dramatically in the past year, beckoning more Australians to get in on the party. Bitcoin – the world’s biggest digital currency – was worth around US$9000 this time last year. It is now worth nearly US$35,000.
ATO assistant commissioner Tim Loh revealed that over 550,000 Australians would receive a reminder when they go to submit their 2021 tax return. This reminder will be administered on the myTax portal as a pop up to remind Australians to include any gains or losses resulting from crypto investment or trading.
Source: © Aoutphoto | Megapixl.com
INTERESTING READ: How is Australia progressing with cryptocurrency regulation?
So How Does It Work?
If cryptocurrency is bought for what’s considered “personal use” purposes, it’s not subject to any tax. “Personal use” refers to any crypto bought and held for a short time and used to purchase personal goods and services. The longer one holds a cryptocurrency, the less likely the ATO will consider it for personal use.
The ATO views digital currency the same as any other asset class, such as shares or property. As such, it’s subject to Capital Gains Tax (CGT) if bought and sold or swapped. Therefore, Australians are required to keep a record of any gains or losses made from crypto trading.
Capital Gains Tax will also be applied to the buying and selling of Non-Fungible Tokens (NFTs), which have also gained popularity in the past twelve months. An NFT is a digital asset holding unique material such as music files, picture files or digital files. Earlier this year, an NFT holding the original copy of popular the YouTube video “Charlie Bit My Finger” sold for nearly USD$761K.
What is Considered for Capital Gains Tax?
The ATO will be keeping close contact with providers and exchanges, and any crypto held for at least twelve months means that the taxpayer will be entitled to a CGT discount. However, in most instances, digital currency is not considered a personal use asset and therefore, users are required to keep records of dates where the crypto is bought and sold as well as the price at which it’s bought and sold for.
Any crypto held for longer than twelve months is considered not for personal use and is thus subject to CGT.
Therefore, any crypto asset held for longer than twelve months will receive a 50 per cent tax discount on any gains made.
However, if any losses are made on a digital asset, they can only be offset in that year.
This would be of particular interest to those who’ve invested in Bitcoin over the past few months as recently, crypto such as Bitcoin (BTC) has seen a massive drop in price since around April 2021.
In mid-April, Bitcoin hit a record high of around US$65,000. Since then, the price has dropped off rapidly.
Sign of Maturity
While this may come as bad news for some crypto users, it can also be seen as a sign of maturity for cryptocurrency as it moves more and more mainstream.
This mainstream move has caused digital currencies such as Bitcoin to become more collaborative with major banks and other financial institutions and the ATO.
It’s highly recommended that cryptocurrency users consult the Australian Tax Office website or their accountants to cater to their personal taxation’s needs.
GOOD READ: Who should invest in cryptocurrencies?
