INTHEBLACK November 2021 - Magazine - Page 29
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PHOTO COURTESY AUSTRALIAN TAXATION OFFICE
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Above: Tim Loh, Australian Taxation Office
CGT rules. Proceeds from the sale of cryptocurrency
held as trading stock in a business are ordinary
income, and the cost of acquiring cryptocurrency held
as trading stock is deductible.
This is much the same treatment that would apply to
a person who is carrying on a business of share trading.
There are also situations where an isolated
cryptocurrency transaction or series of transactions can
give rise to ordinary income if the transaction was entered
into with a purpose or intention of making a profit,
and the transaction is part of a business operation or
commercial in character.
“We also recommend that agents access pre-fill
reports available through online services for agents,”
the ATO says. “These reports can help agents update
their tax time questionnaires to include a question
that will prompt their clients to disclose their crypto
activities to the agent, including buying, selling and other
investment activities.
“It’s also important for agents to include capital losses
in the tax return, so their clients don’t forget to apply these
losses when they make a future capital gain.”
James Tng, a partner at accounting firm Moore
Australia, says it is the responsibility of tax agents
to ensure the returns being lodged on behalf of clients
are correct.
“There is a bit of risk for accountants out there,
where clients choose not to be forthcoming. In the
eyes of the ATO, it’s tax evasion by not declaring the
income on cryptocurrency gains.”
Tng adds that accountants should explain the tax
position on cryptocurrency gains and losses to clients,
including the need to revalue assets in Australian
dollars, which may also lead to currency gains.
Accountants should also be across how
cryptocurrency investments apply for self-managed
super funds (SMSFs).
While SMSFs are not prohibited from investing
in cryptocurrencies, the investment must be allowed
for under the fund’s trust deed, be in accordance
with the fund’s investment strategy and comply with
the Superannuation Industry (Supervision) Act and
regulations.
The advice from the ATO is for cryptocurrency traders
to keep accurate records, including dates of transactions,
the value in Australian dollars at the time of the
transactions, what the transactions were for and who the
other party was, even if it’s just their wallet address.
Similar to record-keeping requirements for other
types of income and deductions, bank statements
generally do not include all the required information.
Instead, it’s best for cryptocurrency traders to keep
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intheblack.com November 2021 29