CANBERRA: Since the ATO released the Convenient Guidance Paper, the position stands that bitcoin and most cryptocurrencies are a form of property and are taxable.
The ATO recently commented on the taxable nature of bitcoin, saying: “Any financial gains made from the selling of bitcoin will generally be subject to capital gains tax (CGT) and must be reported to the ATO”.It should be noted that while the Convenient Guidance Paper specifically refers to bitcoin, it is assumed that the rules set out apply to most cryptocurrencies.
In short, the ATO believes that bitcoin, Ethereum and all other cryptocurrencies are a “form of property” and are thus taxable.According to the ATO, the office will be actively seeking out individuals that attempt to avoid paying tax on crypto profits and has set up a special task force to investigate such matters.How the ATO plans to identify these individuals, however, is unclear, especially with the introduction of private coins that are often used by our clients for complex and information-sensitive matters, with no intention of avoiding tax or committing an offence.The ATO currently has access to a range of powers that allow it to investigate “unexplained wealth and conspicuous consumption that may arise through profits derived from cryptocurrency investment”. However, there has been no mention of the ATO using platforms such as Chainalysis to identify crypto tax evaders in Australia, as is currently implemented by the US Internal Revenue Service.Digital currency and cryptocurrencies for business transactions need to be recorded in AUD as part of the business’ normal income.When you are operating a business and you purchase business-use items (including trading stock) using digital currency, you are entitled to a deduction based on the arm’s length value of the items purchased.If a business accepts payment in digital currency, that business may be charged GST on the cryptocurrency received. Normal rules of claiming input tax credits are applicable for the GST charged on cryptocurrency received if the supply of the goods and services was a taxable supply.
