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Cryptocurrency – The Taxman is Watching Part 2

By Joe Smith


A couple of years ago I wrote an article about cryptocurrency and how the ATO were looking at it closely and deciding on how it would be treated for tax purposes. Since then the ATO have decided that a capital gains tax event occurs when you dispose of cryptocurrency – this will be when you sell it, gift it to someone else, trade or exchange for another cryptocurrency, convert it to regular currency such as Australian dollars, and finally if you use it to purchase goods or services.


In addition to this, if you trade cryptocurrency regularly, the ATO may treat this as a business and in this case the income would be taxed as ordinary business income with no capital gains concessions available.


The only instance where some capital gains or losses from cryptocurrency would not be taxable is when it is classed as a personal use asset. This is a tricky area however the basic criteria to meet this is if the currency is kept or mainly used to purchase items for personal use or consumption. It must be acquired and used within a short space of time as well to be classed as a personal use asset. If it is held for some time before any purchases are made using it or if only a small portion of it is used for these personal transactions then it is likely that the ATO would class this as an asset for capital gains tax purposes.


With all of this in mind, we know that the ATO has been issuing letters to taxpayers who have disposed of cryptocurrency and have not included it in their tax returns. So, if you do have any cryptocurrency it is advisable to let your accountant know and they can advise you on whether you need to include details of this in your tax return.


With the recent rise in the value of various types of cryptocurrency there may be people cashing in on this so please keep in mind that that the ATO are still watching. With improvements in their technology and data collection capacity it is likely that they will know who owns what and if they sell part or all of their investments during a tax year.


And finally, remember that the ATO are very resourceful and can look at your lifestyle and living expenses if you get audited and have not declared any type of capital gains or taxable income. If you have any queries on tax and cryptocurrencies, talk to the tax experts at UHY Haines Norton CQ on 4972 1300 or email me at j.smith@uhyhncq.com.au

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