Monday, 18 June 2018 06:06

Cryptocurrency gains to come under ATO's eagle eye: tax agent

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The Australian Taxation Office will take a hard look at those who have been dabbling in cryptocurrencies over the 2017-18 financial year come tax time, a private tax agent claims.

Liz Russell, a senior tax agenet at etax.com.au, said in a statement that the ATO would be very strict in using its data-matching technology to make sure that Australians who had made any gains through trading in cryptocurrencies paid any taxes that were due.

“It’s important to know how the ATO classifies cryptocurrency, as this determines how it’s treated for taxation purposes. There is a long-running debate over what cryptocurrency actually is – whether it’s an asset, currency or collectible – but the ATO has made it clear that it treats cryptocurrency as an asset," she said.

“That means it’s subject to the same capital gains tax provisions that apply to real estate and shares.”

Russell pointed out that while cryptocurrencies were often touted as an anonymous payment system that could not be tracked by banks or government bodies, the ATO could check against hundreds of data sources to determine whether taxpayers were reporting all of their income – including gains from cryptocurrency trading.

Though cryptocurrency movement was anonymous, the ATO had the ability to track transactions once it had been converted to fiat currency.

“Let’s say you originally bought $5000 worth of XEM, which is one of the lesser-known coins consistently in the top 10 of cryptocurrency market caps. If you later traded it for fiat currency of $8500, then the $3500 in profit is considered a capital gain, and you’ll need to add it to your assessable income for the financial year – much like you would any gains you make the sale of shares or an investment property,” Russell explained.

On the other hand, if trading cryptocurrency had led to a loss, then the amount from the capital gains made from another asset could be deducted in the same financial year or a later year - and therefore reduce tax liability.

“For example if you made a $3000 loss on the sale of cryptocurrency but a $4000 gain on the sale of shares, your net capital gain would be the $4000 gain minus the $3,000 loss, equalling a $1,000 capital gain," Russell said.

She said the sole exception to paying CGT on cryptocurrency was when purchasing items or services for personal use.

“The small beachside town of Agnes-Water-1770 in Queensland recently made headlines for being Australia’s first ‘digital currency-friendly’ tourist town, enabling visitors to use cryptocurrency for everything from restaurants, cafes and beauty salons through to train, coach and transfer tickets via the local travel agent," she said.

"For these sorts of transactions, no CGT is payable when disposing of cryptocurrency."

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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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