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Traders have called for more guidance on how their assets are taxed following an ATO compliance crackdown.
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Nearly half of crypto investors unclear on tax rules, survey finds
05 July 2024
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Almost half of cryptocurrency investors have admitted they are unclear on how their holdings are taxed, neglecting compliance and record-keeping, according to a recent survey.
The annual Independent Reserve Cryptocurrency Index found that approximately 45 per cent of Australian cryptocurrency investors did not understand their tax obligations.
A further 54 per cent of respondents said they wanted more guidance from the ATO “around what is taxed, when, and why”.
The findings were from a survey of over 2,100 taxpayers on their attitudes towards cryptocurrency including their awareness, adoption, trust and confidence carried out by Independent Reserve and PureProfile.
Shane Brunette, founder of the Crypto Tax Calculator tool available through Independent Reserve’s interface, said the biggest mistake made by investors was failing to keep accurate and detailed records of their transactions.
“Most cryptocurrency investors don't realise that many transactions involving cryptocurrencies could be a taxable event,” he said.
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“It’s critical to prioritise tax planning and compliance from the very beginning. We know the Australian Tax Office is placing increased emphasis on crypto, and you don’t want to get caught with a hefty tax bill, or penalties for non-compliance.”
The ATO treats cryptocurrency as an asset that incurs capital gains tax on disposal, with a 50 per cent discount applicable if held for more than a year.
Income tax liabilities are also incurred if cryptocurrency is paid or earned through a method known as staking, where a trader gets paid for taking part in validating transactions on the blockchain.
In April, the ATO announced it would be ramping up its surveillance of traders that fail to comply with CGT obligations, acquiring records of up to 1 million traders from cryptocurrency exchanges.
It would also acquire the addresses, birthdays and transaction details of traders as part of its expanded data-matching initiative.
“The purpose of this data matching program is to ensure that taxpayers are correctly meeting their taxation and superannuation obligations in relation to cryptocurrency transactions and ownership,” the ATO said.
Brunette it was imperative to keep comprehensive records of all cryptocurrency transactions on all platforms and wallets, and records should include dates, amounts, types of when investors bought, sold and traded assets and the value at the time of each transaction.
Investors should also know what counts as a taxable event, with short-term gains (held for less than a year) typically taxed at higher rates than long-term gains (held for more than a year).
“Common taxable events include selling cryptocurrency for fiat currency, trading one cryptocurrency for another, and using cryptocurrency to purchase goods or services,” he said, while simply holding cryptocurrency was not a taxable event.
“It’s important to note that trading one cryptocurrency for another is a taxable event. For instance, trading Bitcoin for Ethereum requires reporting any gains or losses on the Bitcoin eTrade.”
Failing to recognise a taxable event could lead to an incomplete picture of investors’ cryptocurrency income. “Ensure that all income related to cryptocurrencies is reported,” he said.
“This includes mining income, staking rewards, and any interest earned from cryptocurrency savings accounts.”
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