by Cindy Huynh
The Australian Tax Office (ATO) is currently seeking the public’s input on taxing cryptocurrencies. They are eager to hear from the public and understand how cryptocurrencies and cryptocurrency tax implications can impact businesses in the future.
On March 26, the ATO mentioned the update of their cryptocurrency taxation guidelines on March 13. However, the increased interest in cryptocurrency taxes resulted in a large number of queries from the community concerning specific tax events. To clarify the situation, the ATO is launching a “community consultation” to understand and address the common questions about cryptocurrency transactions:
“The purpose of this consultation is to seek feedback on practical compliance issues arising from complying with taxation obligations about cryptocurrency transactions. In particular, we are interested in any practical issues that may impact on taxpayers’ abilities to calculate and substantial any capital gains and losses for capital gains tax (CGT) purposes.”
The ATO Seeks Feedback from the Community
Australia has had a fluctuating relationship with cryptocurrency regulations. In 2014, they had a controversial sales tax policy for cryptocurrency transactions that resulted in a double tax for Australian citizens.
While this frustrated many cryptocurrency traders, the Australian government then confirmed in a budget summary released in May 2017 that they would treat cryptocurrencies “just like money,” and it would no longer be double taxed. However, in February 2018, the ATO, like the IRS considered cryptocurrency as “property,” subjecting any profits gained from a cryptocurrency transaction to a capital gains tax.
As mentioned on their website, “Bitcoin is neither money nor a foreign currency, and the supply of Bitcoin is not a financial supply of goods and services tax (GST) purposes. Bitcoin is, however, an asset for capital gains tax (CGT) purposes.”
Price Volatility Complicates Tax Liabilities
It’s not a surprise for the Australian government to seek feedback and input from the public, considering their fluctuating cryptocurrency taxation laws, especially when it comes to “practical issues that arise in relation to the CGT record-keeping rules.”
On the ATO website, a comment left by marksub, however, highlighted the realities of tracking each cryptocurrency transaction and following the current CGT record-keeping rules, “The accounting practicalities are nightmarish.” He ended his comment stating that the ATO needs to take into account the differences between crypto and share trading and that the price volatility of cryptocurrencies makes taxation extremely difficult.
Queensland MPs Join the Bitcoin Craze
Despite the Australian government’s complicated relationship with cryptocurrencies, newly elected Member of Parliament (MP) Nick Dametto, and Labor Party’s Bart Mellish both recently declared owning bitcoin assets and accounts. Dametto and Mellish are the first two the Australian politicians to reveal their ownership of bitcoin.
In an interview with Fairfax Media, Damatto mentioned that he bought bitcoin in October 2017 and during the end of the year, it increased in value. “At one point my A$5000 investment went up to A$60,000, then it crashed after Christmas,” said Damatto. “I think it’s worth about A$20,000 at the moment, which I think is a good investment, but it’s not at the heights as it was at before.”
While Australia is cracking down on crypto tax evaders, they’ve come a long way to adopt a healthier pro-crypto stance. Australia is reasonably supportive of new technologies and opportunities. As mentioned in the ASIC ICO information sheet, Australia sees ICOs as having “the potential to make an important contribution to the options available to businesses to raise funds and to investment options available to investors.” Unlike the IRS, the ATO appears more cooperative and understanding towards the Australian public when it comes to cryptocurrency taxes.