Latest News
Hot Issues
Tax Office sounds alarm on popular property strategy
Our Advent calendar for 2018
‘Please do not panic’: ATO boss addresses STP concerns
Stop!! Don't do a paper Budget, use our online budgeting tools instead.
Employee Christmas Parties and Gifts – Any FBT?
Behavioural Coaching and your financial plans
FBT – Christmas Parties and Taxi Fares
Information needed to be the BBQ expert.
Tax consequences of trust vesting
Fringe Benefits Tax (FBT): employees’ private use of vehicles
ATO to contact clients over bank details
ATO claws back $850m in unpaid SG in FY 17-18
Appetite for property in SMSFs shows signs of life despite tough market
Superannuation gender gap narrowing, research shows
Identification numbers for directors
How financial advice helps create wealth.
Australia's vital statistics
Unlocking equity crowdfunding in Australia
$20m boost for SME clients looking to exporting
Work-Related Expenses
ATO updates crypto guidance
ATO zones in on hundreds of newly created reserves
Senate passes $20,000 instant asset write-off extension
Victorian Vacant Property Tax
Director Penalty Notices
ATO set to pounce on undisclosed income streams
In case you missed it – The company tax Bill that did pass Parliament.
GST spotlight headed to smaller end of town
Superannuation Amnesty – Maybe! Maybe Not!
ATO drills in car-sharing focus this tax time
Articles archive
Quarter 3 July - September 2018
Quarter 2 April - June 2018
Quarter 1 January - March 2018
Quarter 4 October - December 2017
Quarter 3 July - September 2017
Quarter 2 April - June 2017
Quarter 1 January - March 2017
Quarter 4 October - December 2016
Quarter 3 July - September 2016
Quarter 2 April - June 2016
Quarter 1 January - March 2016
Quarter 4 October - December 2015
Quarter 3 July - September 2015
Quarter 2 April - June 2015
Quarter 1 January - March 2015
Quarter 4 October - December 2014
New rules capture SMSFs trading big with cryptocurrency

Sizeable cryptocurrency transactions will “come to the attention of the ATO” under new rules that came into effect this week, so a mid-tier firm has put together a checklist of key considerations to keep SMSF investors compliant.



     



As of today, all cryptocurrency exchanges must be signed up to a new Digital Currency Exchange Register. Transactions exceeding $10,000 must also be reported to AUSTRAC to meet existing rules for bank transfers and cash transactions.


“People will need to be ready to explain not only where the money came from, but also to show that they have followed the ATO’s rules,” said partner at HLB Mann Judd, Peter Bembrick.


“A critical aspect for an SMSF’s compliance is having the right documentation to establish that the investment has been made by the fund, as well as keeping track of the market value annually and recording disposals, gains and losses,” Mr Bembrick told SMSF Adviser.


Ignorance of the tax-related consequences of cryptocurrency exchanges is not adequate defence, particularly given the very public campaigning of the ATO about cryptocurrency in the lead up to tax time.


“There are a number of areas that may catch people by surprise, if they haven’t done their research. It’s never a good idea to fall foul of the ATO and, as always, ignorance of the rules is not considered an adequate defence for failing to pay the appropriate tax.”


Mr Bembrick prepared a checklist for professionals with clients who hold cryptocurrency, as follows:


The tax implications of mining cryptocurrency


Generally speaking, the ATO would treat activities to acquire cryptocurrency by mining additional units as a business, and the value of units acquired would be assessable income in the year of acquisition.


“On the assumption that the cryptocurrency units are treated as either trading stock or CGT assets, however, then any further unrealised increased in the value of units held will not be taxable until they are eventually realised on a later disposal,” Mr Bembrick said.


“In addition, if there are direct costs such as electricity or the depreciation of equipment dedicated to cryptocurrency mining activities, these should be tax deductible against the income received from the cryptocurrency mining business,” he said.


Claiming a personal use exemption


The ATO will accept that cryptocurrency is a personal use asset if it can be shown that it was acquired purely to hold and then exchange for other goods and services, and not with the intention of making a profit or in the course of carrying on a business, Mr Bembrick said.


A personal use asset — with examples including a car, boat or holiday home — is exempt from CGT if it costs less than $10,000.


“However, the question of intention can be quite subjective and is not always so easy to prove,” Mr Bembrick said.


Tax payable if someone is paid using cryptocurrency


Contrary to some client chatter, if someone is paid in cryptocurrency for goods or services they provide in the course of carrying on a business, this payment is still taxable.


“The ATO views this in just the same way as being paid with other goods or services, that is, as a form of barter arrangement. The taxable amount is the AUD value of the non-cash consideration for the goods or services at the time of the transaction,” Mr Bembrick said.


“Similarly, if cryptocurrency is used to pay for goods and services in the course of carrying on a business, the AUD value of the payment would be treated for tax purposes in the same way as if you had paid the equivalent amount in cash,” he said.


Capital gains tax


As the ATO indicated in its guidance note last year, there is a taxable capital gain when a cryptocurrency unit is sold for more than the purchase price, and a capital loss when it is sold for less than originally paid.


“The capital gain or loss needs to be recorded on the personal tax records, just as any other investment such as shares,” Mr Bembrick said.


“For Australian residents who have held the cryptocurrency for at least 12 months, a 50 per cent CGT discount can be claimed, meaning they only pay CGT on half of the actual gain,” he added.


Further, it’s important clients are aware of the difference between investor and trader for tax purposes.


“Just like other investments, be aware that the ATO may treat some investors as a trader or speculator. This means that, if the purpose of buying and selling cryptocurrency was for short-term profit rather than long-term capital growth, then any gains would simply be taxed as personal income, without any access to the CGT discount and without the ability to offset any capital losses from other investments against the cryptocurrency gains,” Mr Bembrick said.


“The only good news is that trading losses can be offset against other types of income,” he added.


Not a currency


Cryptocurrency, such as bitcoin, is not a currency, but rather is treated as an asset for tax purposes.


Consequently, the price in Australian dollars will change over time, which is important because it means that there are tax consequences from the purchase or sale of a unit of cryptocurrency.


“As with other investments, the exact nature of the tax implications will depend on the taxpayer’s related activities as well as their intention when they acquired the cryptocurrency,” Mr Bembrick said.




By: Katarina Taurian
03 APRIL 2018
www.smsfadviser.com





23rd-May-2018

| home | our firm | about us | our compliance services | our consulting services |
| our pricing structure | secure FTP | latest news | links | contact us
|

CORPTAX SOLUTIONS Pty Ltd Chartered Accountants & Registered Tax Agents
ABN 83 095 268 358 | 23 St Helier Drive SORRENTO, WA. 6020 Australia | Phone: + 61 8 9246 9536 | Fax: +61 8 9246 9588
e-mail : info@corptaxsolutions.com.au

Site By AcctWeb