Did you report your Cryptocurrency investing in 2018?
As predicted by our firm in 2017, the Australian Taxation Office (“ATO”) has commenced contacting taxpayers who were engaged in Cryptocurrency dealings in the 2018 financial year.
Below is an example of correspondence sent to our clients who have yet to lodge their 2018 tax return.
You will note from the above example that the ATO has allowed for taxpayers to amend their tax return by 1 April 2020.
This gives taxpayers less than 4 weeks to sort out their cryptocurrency tax affairs.
Some common questions asked by our clients include:
Do I have to declare my gains and losses from cryptocurrency dealings in my Tax Return?
You will need to declare all gains and losses from cryptocurrency trading and investing in your Income Tax Return.
This includes trading from one cryptocurrency to another cryptocurrency.
For example, if you trade Bitcoin (BTC) for Ethereum (ETH) and you don’t cash out.
This means even if you don’t cash out to AUD(Fiat) you still need to calculate your gains and losses for that financial year across all trading exchanges.
It can be a complex exercise depending on the number of trades undertaken.
Aren’t cryptocurrencies anonymous, how will the ATO know if I made money?
If you have an account with an Australian digital currency exchange, then it is likely that the ATO already has your data.
In April 2019 the ATO announced their data sharing program with all Australian digital currency exchanges. As a result the ATO has now received transaction data in relation to trading, deposit and withdrawal history. The ATO has also received identifiable information which you would have provided prior to opening your account (Know your customer – KYC) with the relevant Australian digital currency exchange. You should be aware that the ATO has retrieved data from as far back as 2014.
What happens if I ignore the letter?
If you ignore the ATO, then you may be issued with a default tax assessment. A default tax assessment is based on what the ATO believe your tax liability should be. It is not uncommon for the ATO to rely upon false assumptions when calculating your default tax assessment.
For example: the ATO may count withdrawals from one exchange to another as a SALE.
This of course is incorrect as you may have only transferred it from one exchange to another or to a storage wallet.
This will result in an increase in your tax liability. It will then be up to you to disprove the ATO’s default assessment, which can be costly and time consuming.
What are the penalties if I do not declare my Cryptocurrency dealings to the ATO?
You may be subjected to a thorough audit.
Penalties of up to 75% of the amount of any tax shortfall i.e. $10,000 tax bill could result in you paying $17,500 ($10,000 + $7,500).
General interest charge, currently 7.89% per annum.
How can Crypto Tax Australia help you?
Crypto Tax Australia is one of the very few accounting firms who have experience and expertise in the area of Cryptocurrency taxation.
We rely upon our experience to ensure that what is otherwise a complicated process is a simple and considered approach to your individual taxation needs.
We understand the taxation of all aspects including participation in Initial Coin Offerings (ICO), Hardforks, Mining Income, Margin and CFD Trading, DEFI Lending and Capital Gains Tax.
95% of our clients are cryptocurrency Traders, Investor, Miners and Businesses. We live in this world.
If you have any questions please get in touch with out firm at Crypto Tax Australia.
The 2018 Lodgement Due Date is Fast Approaching
The final lodgement due date is fast approaching and before you know it, the May 15th 2019 tax deadline will be here.
This email is to inform you of the facts of holding off or not declaring your Crypto investments or trading, we are not interested in scare tactics, only to make you aware.
If you want to know the facts of the situation then keep reading.
What the ATO is doing?
The ATO has already contacted the Australian exchanges and has asked for sample data on who have used their platform.
All Australian exchanges required a KYC to get started so the ATO already may have your details and are waiting to see if you declare any Crypto investing or trading in your tax return this year.
This means that they may already or soon will, have your name and amount of money you invested.
Australian Exchanges need to be both registered with ASIC and AUSTRAC. (AUSTRAC is an Australian Government Financial Intelligence Agency that was set up to monitor financial transactions. It specifically looks to identify money laundering, tax evasion, welfare fraud, terrorism and organised crime.
The ATO has the power to penalise you for intentionally disregarding to include your Crypto investments in your tax return.
See – https://www.ato.gov.au/general/interest-and-penalties/penalties/statements-and-positions-that-are-not-reasonably-arguable/
What this means is if you intentionally do not include your Crypto investments in your return you can get hit with a penalty for not declaring (up to 75% of the potential tax bill) on top of what you may owe, plus interest.
You may be thinking, but I made a loss on my investment and trading so do I still need to declare?
The answer is YES, and the question to you is, If you have lost money during this year long Bear market, then why are you denying yourself a Capital Loss or greater refund?
What We Do!
We know that having to declare your Crypto trading and investing can be a daunting task and that is why we provide a comprehensive solution to your Crypto investing, whether that being a Hodler, Day Trader, ICO investor, Trading on Margin & CFD Trading, being Scammed on ICO’s or Ponzi type schemes or have just lost money overall.
Your average accountant may not understand Crypto.
You don’t want to be going to your accountant explaining to them what a Bitcoin, a wallet or an exchange is.
This will waste both your time and money while they charge you to research everything there is to know about it. And after all of that are you confident in what they have prepared?
Alternatively if you’re doing it yourself, are you confident in what you have prepared?
I would be asking myself:
• Are all trades, withdrawals, deposits and ICO’s accounted for correctly?
• Am I confident about whether I have classified myself correctly as a trader or an investor?
• Are the calculations when preparing my business schedule or Capital Gains report in my tax return correct and do I have the right values?
• Has the Margin Trading and CFD trading been reported correctly? (Bitfinex and Bitmex)
• Are there any more expenses that I can possibly claim to decrease my profit as much as possible?
• If an ATO auditor was sitting across the table from me, would I be confident in handing over my calculations.
We resolve all of these types of transactions and have dealt with almost any situation over the course of the hundreds of tax returns and calculations we have completed.
Why You Should Be Lodging On Time and Declaring
The main reason why you want to lodge on time is to avoid the following:
• A late lodgement mark will be added to your taxpayer history which could influence any decisions or leniency requested from the ATO in later years.
• The ATO may issue a penalty letter as well as any interest on the potential payable position (see above)
• The lodgement due date is brought forward for the 2018/2019 tax year, EVEN if you are registered with a Tax Agent.
Meaning, if you lodge late this year, the due date will be brought forward for your next tax lodgement due date and payment to the 31st of October 2019.
This of course reduces your ability to plan in advance or be entitled to the concessional lodgement date being 15 May 2020.
You may for some reason have a large tax bill to pay in this current financial year. i.e. from trading, selling of a investment property or the like, so would it not suit you to have the money sitting in your bank account for a little longer than the ATO’s?
Lets say you do not declare this year, the scenario may play out that the ATO will issue you a letter of demand asking you to declare any profit or loss that you generated from your Crypto investing after obtaining evidence from the Australian Exchanges.
If ignored, The ATO may issue you a penalty for not declaring (up to 75% of the potential tax bill) on top of what you may owe, plus interest, as well as issue an amended notice of assessment based on what they think. (this will most likely not be in your favour)
HOW WE CAN HELP
If you still need to declare your Crypto investments or trades and have either lodged without declaring or are yet to lodge your tax return I would do so ASAP.
We can ensure that your tax return is lodged on time, all investments are accounted for correctly and take advantage of the insights we have in this specialised area to ensure you are claiming as many deductions as possible to reduce any potential gain, or maximise the loss of your trading and increase your refund.
We are always happy to have a chat about your personal circumstances and how you can benefit from declaring even if you have made a loss during the 2018 financial year.
If your still unsure or want to have a further chat on how we can assist, do not hesitate to give us a ring or contact us on our contact page.