Up to one million Australians will be forced to pay more tax this year with the Australian Taxation Office set to crack down on cryptocurrency trading.
Digital currency holders have been told to prepare for the upcoming tax season in July because the ATO will be taking extra care to ensure all cryptocurrency exchanges have been claimed.
The ATO issued a warning last year that money made from trading cryptocurrency is taxed as business income and needs to be declared.
The ATO will use data collected from trading sites to trace the profits of the 500,000 to one million Aussies using crypto this financial year
H&R Block’s Director of Tax Communication Mark Chapman told Seven News the ATO will use data collected from trading sites to trace the profits of the 500,000 to one million Aussies using crypto.
‘Increasing numbers of taxpayers are jumping on the bandwagon and the ATO believes that some of them are failing to declare the profits – and in some cases the losses – they are making on their investments,’ he said.
‘To help them in their search, the ATO is collecting bulk records from Australian cryptocurrency designated service providers as part of a data-matching program to ensure people trading in cryptocurrency are paying the right amount of tax.’
Crypto Tax Calculator can be used to help crypto traders calculate the amount of tax they owe.
The ATO has recently claimed a $8.7 billion shortfall from taxpayers and are expected to closely watch tax deductions claimed this year
However Mr Chapman advised cryptocurrency won’t be the ATO’s only focus this financial year.
The ATO has recently claimed a $8.7billion shortfall from taxpayers and are expected to closely watch tax deductions claimed this year – especially regarding work from home expenses.
‘The focus on home office, mobile phone and home internet costs is likely to be particularly pronounced with so many people working from home due to Covid’ Mr Chapman said.
He recommends taxpayers check they have the necessary proof for expense claims – invoices, receipts, diaries, etc. – before submitting a tax deduction.
WHAT ARE CRYPTOCURRENCIES?
A cryptocurrency is a digital currency that can be used for transactions online.
It is the internet’s version of money – unique pieces of digital property that can be transferred from one person to another.
All crytocurrencies use ‘blockchain’ and one can only be made and shared using specific agreed-upon rules. For each cryptocurrency the rules are slightly different.
Bitcoins are lines of computer code that are digitally signed each time they travel from one owner to the next. Physical coin used as an illustration
People can buy bitcoins through exchanges such as Coinbase and Bitfinex.
Bitcoin was the first cryptocurrency, created in 2009.
Other currencies such as Litecoin and Dogecoin do the same thing but have slightly different levels of inflation and rules surrounding transactions.
Currently around 270,000 transactions are taking place every 24 hours.
These currencies don’t exist as physical or digital objects. They are just a collective agreement with other people on the network that your currency was legitimately ‘mined’.
Blockchain is the record of changes in ownership of in a currency which is broadcast through the network and maintained by computers around the world.
The network works by harnessing individuals’ greed for the collective good.
A network of tech-savvy users called miners keep the system honest by pouring their computing power into a blockchain, a global running tally of every bitcoin transaction.
As long as miners keep the blockchain secure, counterfeiting shouldn’t be an issue.
However, because cryptocurrencies allow people to trade money without a third party getting involved, they have become popular with libertarians as well as technophiles, speculators — and criminals.