Record keeping for cryptocurrency transactions
Bitcoin Part 3 – Cryptocurrency Compliance
Bitcoin is “neither money nor a foreign currency” the ATO says, but it is still an asset that can generate assessable income or a capital gain. In Part 3 of our series on bitcoin, we look at the compliance implications of operating with bitcoin and how the ATO intends to monitor cryptocurrencies in general.
Part 1 of our series on bitcoin looked at the tax consequences for those who invest in bitcoin on a personal level. Part 2 examined the tax consequences for businesses that buy and sell bitcoin, mine bitcoin, and what happens when bitcoin is used in transactions. With recent news of the ATO’s new cryptocurrency task force, here in Part 3 we cover compliance.
Cryptocurrency task force
It has recently been reported that the ATO has created a specialist task force to identify and track cryptocurrency transactions and to counter tax evasion in this area. The ATO will work closely with banks, but it also has a team of experts on hand, including tax experts, lawyers, financial advisers and technology specialists. They will meet for the first time in February 2018. A spokesman commenting on the topics for discussion advised:
“We will discuss common queries and scenarios, practical issues and the tax
implications for current and anticipated future developments in relation to cryptocurrencies.”
Liabilities for transactions
While the ATO is formulating their strategy in this area, you might want to know what liabilities you could face if you have already invested in bitcoin and its value has either risen (resulting in a gain) – or what will happen if it has fallen (leading to a loss) – following a deal.
Example
A property seller receiving $1 million in cash may have to pay tax on the profit at the end of the tax year based on the sale being completed for $1 million. A seller who receives $1 million in bitcoin that doubles in value from the day the property settlement takes place may have to pay CGT not only on the $1 million property sale, but potentially also on the $1 million gain on the bitcoin if it is later disposed of.
How will the ATO keep track?
The ATO has access to data matching already and they can gain access to bank accounts to look for transactions relating to payments made or received, for example to trace purchases of property, luxury cars and other high value goods.
Want to understand more?
Talk to us if you want to understand further how to comply with your tax obligations in relation to cryptocurrency. We will keep you posted on ATO developments in this area.
For expert advice and assistance in dealing with your Tax Audits in Australia, please contact Mathews Tax Lawyers on 1800 685 829
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.