After moving to request all cryptocurrency exchanges to report to the country’s watchdog agency, the Australia Taxation Office (ATO) will be collecting Capital Gains Tax (CGT) on cryptocurrency gains, essentially classifying them as assets.
Cryptocurrency = Asset
Liz Russel, a senior tax agent at a private Australia online tax return service, shared some insights on the way theATO will be treating cryptocurrency gains and what people should expect. Just like in the majority of countries, there is an ongoing debate amid Australian institutions regarding the proper classification of cryptocurrencies.
However, according to the senior tax agent, the ATO has made it pretty clear that it would regard them as assets:
There is a long-running debate over what cryptocurrency actually is – whether it’s an asset, currency or collectible – but the ATO has made it clear that it treats cryptocurrency as an asset. […] That means it’s subject to the same capital gains tax (CGT) provisions that apply to real estate and shares.
The same position is shared by the US Internal Revenue Service (IRS), where cryptocurrency transactions are treated as if they were property transactions.
What Does it Mean?
Put in simple words, Australians will have to pay the CGT tax on any profits they made from trading cryptocurrencies. So, if you’ve bought back when it was $2,000 and sold it at $20,000, the $18,000 profit will be subject to CGT.
However, it also means that any losses from cryptocurrency trading could be written off, essentially lowering the CGT one is subjected to.
Russel also pointed out that the ATO has the capabilities to cross-check “hundreds of data sources” in order to establish whether or not taxpayers were duly reporting their cryptocurrency income.
This is facilitated by the country’s recent move ordering all cryptocurrency service providers to “collect information to establish a customer’s identity, monitor transactions, and report activity that is suspicious or involves cash over A$10,000 ($7,755).”
The agency overseeing such providers is the Australian Transaction Reports and Analysis Center (AUSTRAC) – the country’s money-laundering watchdog.
Do you think there is merit behind ATO’s move to regard cryptocurrency as an asset? Don’t hesitate to let us know in the comments below!
Images courtesy of Shutterstock; Pexels.
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