Australian Tax Office (ATO) Publishes Guide about Using Cryptocurrencies


Australian Tax Office (ATO) Publishes Guide about Using Cryptocurrencies and Executes Plan to “Locate” Transactions

The Australian Tax Office (ATO) is establishing a system to investigate investors and traders after classifying cryptocurrencies, like bitcoin, as assets subject to capital gains tax.

In early 2018, the agency published a guide on the tax treatment of cryptocurrencies. They explained that they saw cryptocurrencies neither as money nor as foreign currency, but as a property considered an asset for Capital Gains Taxes (CGT).

This means that cryptocurrencies in Australia are subject to the same CGT provisions that apply to real estate and stocks; such statements to the statutory provisions could be confirmed by the online services tax agent, Liz Russell. The ATO also considers that the proceeds of cryptocurrency operations are capital gains.

What Are These Tax Provisions Based On?

A $2,000 coin bought at any given time in 2017 and sold for $19,000 near its historic highs at the end of that year would yield a taxable profit of $17,000 on capital gains, which the Australian State believes should be added as taxable income for the fiscal year.

On the other hand, any loss arising from cryptocurrency trading may be deducted from the general tax return of the CGT which could include the sale of shares or property.

In this way investors and traders can avoid paying capital taxes on profits by spending their cryptocurrencies at point-of-sale and retail locations that are accepting and adopting the digital asset. In this case it is not necessary to pay capital tax gains.

The ATO had previously directed investors and adopters of cryptocurrencies to keep records of all transactions.

The practicality of the strict record-keeping requirement reflected in the guide was discussed at a recent community consultation. The full details of the public consultation, which concluded at the end of May, have not yet been made public.

Details required by the agency include: the date of the transaction, its value in Australian dollars and the purpose of the transaction along with details of the recipient's wallet.

It does not matter how many exchange transactions you undertake (…) You need to undertake this process for every transaction occurring during the income year.” an excerpt from the ATO’s guidance read.

Regulation Or Hunting?

The ATO is currently using a mandatory 100-point identification verification system that will implement data comparison techniques to investigate cryptomarket investors.

The tax agency has also made a mandatory request in May: all domestic cryptocurrency exchanges should be registered with the Australian Transaction Reports and Analysis Centre (AUSTRAC).

In accordance with the terms of the new compliance laws in Australia, exchanges are required to cooperate in monitoring and reporting suspicious transactions and to inform all cash transactions in excess of AUD 10,000.

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