Blockchain and cryptocurrency have been on the front pages of many newspapers recently as new applications, technologies, and currencies have been introduced. The ATO is alerting and is monitoring crypto traders to ensure that they are reporting their crypto gains in the right manner.
In this guide, we will pay attention to the guidelines provided by the ATO for cryptocurrency recording.
Contrary to what most people assume, cryptocurrency is captured in the tax system in Australia. As a matter of fact, the ATO is investigating transactions from way back in 2014. Keeping records of your personal Cryptocurrency transactions is quite important in Australia and, in fact, all over the world. The tax office is putting measures in place to ensure that crypto traders are tax compliant.
Crypto Records the ATO is Paying Attention to
In this modern era, technology makes it easier for ATO to collect data. Besides the basic personal information, the other data that will be put into the limelight include the following:
– The way the crypto was acquired;
– The value of the crypto on the day it was acquired;
– The date when you first used your crypto assets to make a purchase, trade or exchange.
Wallet Addresses
Every time you send cryptocurrency to another wallet, the transaction is recorded. For every single transaction, there is an entry with your wallet address and the wallet addresses of the individual or business you sent funds to. All these transactions are also captured with the date and time stamps. Asides from this, all trades made by a trader in any transaction will be documented.
Data Matching
Advanced data matching strategies are being used to compare the records provided by cryptocurrency traders with information from third-party exchanges and other sources. As a result, it is highly likely that the ATO will detect any anomalies in your tax returns.
While this might sound gloomy, there is a bright side to this situation because you can still avoid having problems with the ATO by ensuring that you keep records of everything in a timely manner.
As per the ASIC, all reporting entities must submit data to AUSTRAC when they are involved in cryptocurrency deals that reach the threshold transaction of AUD$10,000. This must be reported within 10 business days.
What Happens to Improper Reporting of Crypto Gains?
Any time a person is involved in any activity that is subject to taxation, they have an obligation to report these gains. In case this is neglected, the ATO will consider it as tax avoidance and treat it accordingly.
In addition, the ATO might choose to impose normal penalties for not reporting your cryptocurrency activities on your income returns. In this case, the penalties will be applicable even if you do not have any details on your cryptocurrency gains.
How to Keep Cryptocurrency Records?
If you want to avoid paying unnecessary taxes and facing other restrictions from the ATO, make sure that you keep proper records of all transactions. These can include:
– Where it was bought;
– The date it was bought;
– How much was paid for it;
– When you use your cryptocurrency to make any purchase, trade or exchange.
The records must also include the details of the individual or business that you sent funds to. If this is not done, then you could be missing out on important tax deductions.
The guidelines and recommendations provided by the ATO make it easy to avoid penalties and other problems related to cryptocurrency transactions and accounting. That being said, it is important to follow them closely.
When you go to an accountant a profit and loss summary is required and hence obtain a report from your portal that show the net profit/loss and also differentiated between Trading profit/loss and/or Capital Gains/ Loss.
This depends on the type of trading you have done, whether it was short term or long term. Due to the complexity of the nature of Crypto it is best to take advice from an Accountant as to how to best manage the records. It may involve buying an online software to make calculations easier and less time consuming.
Talk to Accurate Business & Accounting Services and get help with the crypto gains records and reporting for tax purposes.
Contact us for cryptocurrency tax returns