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Australian Tax Agency Announces Virtual Currency Tax Focus

by Mary Swire,, Hong Kong

09 June 2021

The Australian Taxation Office (ATO) has expressed its concern that some taxpayers do not fully understand the tax implications of cryptocurrency gains.

Assistant Commissioner Tim Loh said that the ATO will write this year to around 100,000 taxpayers with cryptocurrency assets explaining their tax obligations and urging them to review their previously lodged returns. The ATO also expects to prompt almost 300,000 taxpayers as they lodge their 2021 tax return to report their cryptocurrency capital gains or losses.

The ATO is concerned that some taxpayers believe their cryptocurrency gains are tax free or only taxable when the holdings are cashed back into Australian dollars. Loh explained that gains from cryptocurrency are similar to gains from other investments, such as shares. He added that generally, if an investor buys, sells, swaps for fiat currency, or exchanges one cryptocurrency for another, it will be subject to capital gains tax (CGT) and must be reported. CGT also applies to the disposal of non-fungible tokens.

The ATO matches data from cryptocurrency designated service providers to individuals' tax returns. Loh advised that taxpayers keep accurate records, including dates of transactions, the value of Australian dollars at the time of the transactions, what the transactions were for, and who the other party was.

Businesses or sole traders that are paid cryptocurrency for goods or services will have these payments taxed as income based on the value of the cryptocurrency in Australian dollars. Holding a cryptocurrency for at least 12 months as an investment may mean that the investor is entitled to a CGT discount if they have made a capital gain. In limited circumstances, a cryptocurrency may be a personal use asset.

Loh said that if a taxpayer has made a mistake and corrects their return, the ATO will "significantly reduce penalties." However, failure to report on crypto-assets or to take action when prompted will result in penalties and potentially an audit.

TAGS: individuals | capital gains tax (CGT) | compliance | tax | investment | tax compliance | revenue guidance | audit | Australia | tax authority | currency | penalties | trade | services

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