In a year of 800% returns, the ATO is hunting crypto traders

Lil Windex/FacebookRapping about how you made a fortune through bitcoin cash won’t help.

The Australian Tax Office once again wants you to know that your crypto trades for cash will not go unnoticed.

It’s been a big year in terms of cash gains for crypto traders, whether they got out at the the peak for bitcoin or not.

Bitcoin itself started the 2017-18 financial year around $US2500. It climbed to close to $US20,000 in December and the lowest it has dipped in the past 12 months is still well above $US6000.

Pick a major cryptocurrency and you’re pretty much guaranteed it has at least doubled its July 2017 value even at its lowest point in the past 12 months.

And yes, people are cashing in, for real money. A recent article in the Financial Times quoted data from blockchain research company Chainatysis showing that “many longer-term holders sold at least $30bn worth of bitcoin to new speculators over the December to April period, with half of this movement taking place in December alone”.

That’s just bitcoin, which leaves many, many more billions landing in crypto traders’ accounts for the ATO to chase.

“It’s important to know how the ATO classifies cryptocurrency, as this determines how it’s treated for taxation purposes,” Liz Russell, senior tax agent at Etax.com.au, said.

“There is a long-running debate over what cryptocurrency actually is – whether it’s an asset, currency or collectible – but the ATO has made it clear that it treats cryptocurrency as an asset.

“That means it’s subject to the same capital gains tax (CGT) provisions that apply to real estate and shares.”

Russell says that while cryptocurrency pundits often tout it as an anaonymous payment system, once it has been converted into fiat currency, the ATO has “hundreds of data sources” to notify it of any unusual deposits.

And yes, the ATO considers it a capital gain if you trade it for cash.

“Let’s say you originally bought $5,000 worth of XEM, which is one of the lesser-known coins consistently in the top 10 of cryptocurrency market caps. If you later traded it for fiat currency of $8,500, then the $3,500 in profit is considered a capital gain, and you’ll need to add it to your assessable income for the financial year – much like you would any gains you make on the sale of shares or an investment property,” Russell said.

Bitcoin lamborghini ethereum car 2YouTube/BiteSizeBitcoinPeter Saddington bought a Lamborghini with the riches he made in bitcoin. (The Audi R8 is pictured.)

And if you somehow managed to make a loss on crypto trades in the past year, well… perhaps crypto trading isn’t your game. But at least it’s a writeoff.

“If you made a $3,000 loss on the sale of cryptocurrency but a $4,000 gain on the sale of shares, your net capital gain would be the $4,000 gain minus the $3,000 loss, equalling a $1,000 capital gain,” Russell said.

However, if you really wanted to cash in and avoid paying CGT on your crypto gains, there is a better way – tour some of Australia’s more tech-savvy hinterland towns.

The small beachside towns of Agnes Water and the Town of 1770 in Queensland recently made headlines for being Australia’s first “digital currency-friendly” tourist towns, enabling visitors to use cryptocurrency for everything from restaurants, cafes and beauty salons through to train, coach and transfer tickets.

“For these sorts of transactions, no CGT is payable when disposing of cryptocurrency.”

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