Cryptocurrency fever is in full swing and with early investors in blockchain technology making a small fortune, the ATO is wanting their piece of the action. As cryptocurrency technology continues to evolve and change, the ATO are struggling to keep up. For many investors that seek advice directly from the ATO, the response is to ‘watch this space’.
In our recent article – Taxation of Cryptocurrency in Australia – we provided an overview of how cryptocurrency is currently treated under tax law and provides examples of the tax consequences for different investors based on up to date information and guidance released by the ATO.
Cryptocurrency and the applications built on blockchain technology are a new form of investment vehicle which the ATO has never dealt with before. The cryptocurrency market is a unique beast, with borderless trading open to absolutely anyone, 24 hours a day with no close.
There are also a number of cryptocurrency coins developed purely for privacy, with any transactions or wallets being untraceable and every coin having full fungibility with all other coins in the market. This, coupled with the fact that cryptocurrency transactions and earnings are very hard to track, with hundreds of wallets being able to be created in mere minutes with no names, TFNs or other personal details attached means the ATO has a huge task ahead of them to track down tax evaders.
So with all the challenges mentioned above, what is the ATO’s response?
In mid-January 2018, it was announced, that the ATO is creating a specialist task force to tackle cryptocurrency tax evasion.
The ATO states one of the motives behind the task force is to “help inform the ATO’s strategy for supporting the community in understanding their tax obligations, including any further advice and guidance required to improve the client experience.”
If you are investing in cryptocurrency, the ATO wants to ensure, that you are paying the correct amount of tax. Experts from banking, finance, tax law and technology will be a part of the team as they create strategies to follow the money trail.
An ATO spokesperson said ‘“We will discuss common queries and scenarios, practical issues and the tax implications for current and anticipated future developments in relation to cryptocurrencies.”
“Not money or foreign currency”
As the ATO doesn’t currently recognise bitcoin or other cryptos as a foreign currency or money, it’s making the tax and GST conversations particularly tricky.
An ATO spokesperson said “The creation, trade and use of cryptocurrencies is a rapidly evolving area. The ATO is continuing to work proactively both domestically and internationally to identify and respond to any issues related to the tax implications of cryptocurrencies, whether as a result of new types of transactions, new structures or new participants entering the increasingly digitised environment.”
As strategic accountants and crypto tax specialist we have seen an increase in the number of queries regarding tax implications.
Our recommendation is to keep details and evidence of all your cryptocurrency transactions. Ensure to keep details of what was traded, when and to who.
We pride ourselves on being able to provide you with the latest information as it evolves. While tax often isn’t at the forefront of your mind, it’s important to recognise your responsible and tax accordingly.
Godbee Favero Strategic Accountants l Boutique Tax Specialists for Cryptocurrency
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