Tax Tips for Cryptocurrencies

Posted 15 Jun

Tax Tips for Cryptocurrencies

You may be surprised to hear that almost one in five Australians now own cryptocurrency. The first cryptocurrency, considered to be Bitcoin, was founded in 2009. We’ve all heard of Bitcoin now but what you may not realise is that there are thousands of cryptocurrencies available.

With the popularity of this non-traditional currency on the rise, its important to understand that there are tax obligations associated with acquiring or disposing of cryptocurrency.

The ATO has a cryptocurrency data-matching program to allow them to identify and address multiple taxation risks:

  • Capital gains tax (CGT) – If you acquire cryptocurrency as an investment, you may have to pay tax on any capital gain you make on disposal of the cryptocurrency. Disposal occurs when:
    • selling cryptocurrency for fiat currency
    • exchanging one cryptocurrency for another
    • gifting cryptocurrency
    • trading cryptocurrency
    • using cryptocurrency to pay for goods or services
  • Omitted or incorrect reporting of income – In some situations cryptocurrency transactions can also give rise to ordinary income. Taxpayers who trade cryptocurrency or businesses that accept cryptocurrency as payment have obligations to report the income generated in their tax returns.
  • Fringe benefits tax (FBT) – When employees receive cryptocurrency as remuneration under a salary sacrifice arrangement, the payment of the cryptocurrency is a fringe benefit.

From early June, the ATO has given notice it will obtain data relating to cryptocurrency transactions and account information from designated service providers (DSPs). The data obtained will be used to identify the buyers and sellers of crypto-assets and quantify the related transactions.

The ATO will match the data provided by DSPs against ATO records to identify individuals who may not be meeting their registration, reporting, lodgement and/or payment obligations.

The data elements that the ATO will be collecting include client identification details and transaction details.

  • Client identification details (names, addresses, date of birth, phone numbers, social media account and email addresses)
  • Transaction details (bank account details, wallet addresses, transaction dates, transaction time, transaction type, deposits, withdrawals, transaction quantities and coin type)

More information on the ATO’s treatment of cryptocurrency can be found on their website.

The message here is simple: if you have cryptocurrency, you will need to declare it as part of your tax return as you would any other income or investment.

Please feel free to get in touch with your WDF Professional contact or phone 02 6921 5444 to talk with us about how we can help make tax time easier for you and ensure you are meeting your obligations around cryptocurrency.

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