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ATO Takes Aim At Crypto Gains For Tax Time 2022

The Australian Tax Office (ATO) has released its four priorities come tax time at the end of this financial year, honing in on four key focus areas, including record-keeping, work-related expenses, rental property income and deductions, but most importantly, capital gains from cryptocurrency assets, property, and shares.


An entire publication on these four priorities for the ATO this tax time can be read here


It has warned cryptocurrency investors with reminders that capital gains and losses must be reported every single time a digital asset, such as cryptocurrencies or non-fungible tokens (NFTs), is sold. 


The ATO states that if you dispose of an asset such as property, shares, or a crypto asset, including non-fungible tokens (NFTs) this financial year, you will need to calculate a capital gain or capital loss and record it in your tax return.



Generally, a capital gain or capital loss is the difference between what an asset costs you and what you receive when you dispose of it.


“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year. Remember you can’t offset your crypto losses against your salary and wages” Mr Loh said.


“Through our data collection processes, we know that many Aussies are buying, selling or exchanging digital coins and assets so it’s important people understand what this means for their tax obligations,” said Mr Loh.


A reminder that investors in Australia are entitled to a 50% discount on their capital gains tax if they hold onto an asset for longer than 12 months after their purchase. Australians are also not required to pay any form of tax on purchases of digital assets, as long as these purchases are conducted with fiat currencies, such as the AUD or USD. 



Also a reminder that Australians can always offset any future capital gains made with capital losses they have incurred from sales of digital assets, the same as with other assets.


According to the ATO’s guidelines, recording a net capital loss can mean the taxpayer is entitled to a reduction on future capital gains, but not on any of their other income such as salary or wages. 


Given the downturn since October/November of 2021, I’m sure some of us have some capital losses to claim!


Additionally, the ATO asserted in its latest release that NFTs are included in the range of assets on which taxpayers must be aware and are subject to capital gains tax if sold for a profit (or on the contrary, a capital loss for a loss on sale). 


In February, the tax authority set out its stance on NFTs, saying their treatment would follow the same general principles as cryptocurrencies.


Per 9 news, according to the Independent Reserve Cryptocurrency Index (IRCI) 28.8 percent of Aussie investors now hold some form of cryptocurrency in their portfolio, having increased dramatically from 18.4 per cent in 2020.


Treasurer of Australia, Josh Frydenberg also stated that over 800,000 Australian citizens have owned a form of cryptocurrency. 


The proportion of Aussie women who own cryptocurrency has also doubled, rising from 10.1 per cent in 2020 to 20 per cent in 2021.


 “Although Australian regulators and government agencies may have taken a while to get their heads around cryptocurrencies and other digital assets, Australians themselves have sped ahead and we’re really seeing that in past year, as an asset class, crypto has gone from the fringe to the mainstream,” Independent Reserve CEO Adrian Przelozny said.


 “Our IRCI results this year support this, with 28.6 per cent of Australians who don’t currently own crypto telling us they would invest if there were better consumer protections in place. 


“Another 26.6 per cent said they’d buy crypto if industry regulation was improved.”


It is expected that as cryptocurrency and digital assets continue to grow exponentially within Australia, the ATO will only continue to crackdown and warn investors to properly declare their cryptocurrency earnings, utilising data from banks and cryptocurrency exchanges to identify taxpayers failing to disclose any cryptocurrency income.


Stay safe!


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