The ATO demands transparency on your crypto activity
If tax time wasn’t already stressful enough trying to gather all your receipts from the past twelve months, it may have gotten worse if you own cryptocurrency.
Every year, The Australian Taxation Office states areas of interest that they will be cracking down on, and with little surprise, given a quarter of all Australians have now owned cryptocurrency at some point (YouGov Research), cryptocurrency is one of the main targets for the ATO.
What does this mean for Aussies?
When you dispose of a cryptocurrency, it must be accounted for in your tax return.
A common misunderstanding is you only need to report on your cryptocurrency if you made a profit (otherwise known as a capital gain). However, whether you made a capital gain or loss on an asset transaction, it must be reported.
The benefit of reporting a capital loss, however, is the capital loss can be carried forward to future years to offset a capital gain.
It’s important to note that crypto exchanges are communicating with relevant government bodies for taxation purposes. To add another level of stress you are not just limited to paying tax in your country of residence. According to the ATO website, it states “If you have transacted with a foreign cryptocurrency exchange you may have tax responsibilities in another country”.
With the increasing level of data-matching technology that the government has access to, it’s important to be honest and transparent about your cryptocurrency activity on your tax return.
“Through our data collection processes, we know that many Aussies are buying, selling, or exchanging digital coins and assets, so it’s important people understand what this means for their tax obligations,” ATO Assistant Commissioner Tim Loh said.
It can be daunting to think about having to go through all your crypto transactions, especially if you trade regularly between coins.
Luckily there are crypto tax calculators online, that import your data, calculate your capital gains, and present those figures in a summarised report.
Those who are looking to use crypto tax calculators are advised to do their own research and not fall victim to giving their crypto account details to fraudulent websites.