A tax-time crackdown has been warned about for the millions of Australians who keep cryptocurrency in their digital wallets.
Millions of Australians are preparing their end-of-financial-year returns as a crackdown on cryptocurrency owners is threatened.
Australians have been cautioned by the Australian Taxation Office that capital gains, including cryptocurrency, are one of their top objectives this tax season. Cryptocurrency holders who may have excluded cryptocurrencies in previous tax filings may now come under scrutiny.
The ATO has utilized a data-matching software to monitor cryptocurrency transactions and guarantee tax law compliance since 2019, when it was believed that 4.5 million Australians were investing in cryptocurrencies.
The tax authority may get data from bitcoin exchanges and compare it to taxpayer records using the ATO software to identify irregularities.
If earnings or losses from cryptocurrency transactions are left out of a person’s tax reports, experts have cautioned that « there are no excuses. »
One of the most common mistakes Australian crypto owners make, according to Danny Talwar, head of tax at crypto tax calculator Koinly, is simply not knowing how the country’s capital gains laws relate to digital currencies.
While most Australian cryptocurrency investors were aware that they had to notify the ATO if they converted their cryptocurrency into Australian dollars, he said that most individuals were unaware they also had to notify the organization whenever they used one cryptocurrency to buy another.
“From a tax perspective, you must record the purchase price, sale price and the market value of the second crypto asset you’ve acquired,” he explained.
“Not keeping proper records is a big mistake when it comes to tax time.
“With the ease of trading crypto on exchanges, it’s easy to forget what you’ve done in crypto during the financial year.
“However, this will be no excuse to the ATO and it’s important to keep proper records of crypto trades during the tax year to stay compliant with the law.”
A crypto tax calculator, according to Mr. Talwar, will save consumers « tremendous » amounts of time and ensure that they are according to the law.
The best approach to guarantee compliance, according to ATO Assistant Commissioner Tim Loh, is to speak with a licensed tax agent.
“In most situations, crypto is subject to capital gains tax and not considered to be a personal use asset. Withdrawing or selling your crypto at a crypto ATM, doesn’t necessarily qualify you to the ‘personal use’ asset exemption,” he stated.
“If you are trading or investing in crypto assets, you are required to report the gains or losses when you dispose of them in your tax return. “Most taxpayers hold crypto assets as an investment and most activities involving crypto amount to a taxable transaction, which, for investors, usually gives rise to a capital gain or loss.”
In his opinion, regularly monitoring one’s cryptocurrency transactions is the finest thing one can do.
“Records, records, records. We recommend setting up a recordkeeping system as a matter of priority, as we’ve found that the ease of transacting with crypto means that taxpayers often find it tricky to report correctly at tax time,” he added.
Another three « priority » sectors, where Mr. Loh claimed the ATO has continued to see errors, are the ones where the ATO will be cracking down this tax season.
He added,
“Within these areas, we have identified common mistakes, and are particularly focused on addressing these and supporting taxpayers and registered tax agents to get their claims right this year.”
Australians are no longer eligible to claim the prior year’s flat rate of 80 cents per hour due to changes to work-from-home deductions that are now in place.
To claim work-from-home deductions, taxpayers must now use the updated fixed-rate approach, which allows for deductions up to 67 cents per hour, or the actual cost.
As on March 1 of this year, Australians who work from their homes must keep a record of all the hours they put in for the whole financial year due to changes made to the record-keeping standards.
After the ATO discovered that up to 90% of landlords were filing their returns incorrectly, changes to rental property deductions are also being scrutinized this year.
The tax office has signaled that it will pay close attention to demands for interest expenses.
The ATO has promised to ensure that all money generated outside of one’s day job, including employment in the gig economy, is correctly reported, so Australians with side jobs have also been advised to do the right thing when it comes to their tax returns.
