ATO has crypto firmly in its cross hairs

Sensible investment is a long game and even more so when there’s any level of volatility or uncertainty in the market. Butler Settineri Associate RYAN TADDEO provides some insights into the taxation consequences of cryptocurrency when it comes to tax return season.

The Australian Taxation Office (ATO) treats cryptocurrency as a capital gains tax (CGT) asset under most circumstances, meaning tax consequences may arise when a taxpayer trades cryptocurrency or converts it to cash.

As Butler Settineri Associate Ryan Taddeo explains, anyone holding cryptocurrencies as an investment is likely to receive a “please explain” from the ATO if they fail to declare any profits from their sale.

“There are several events in which a taxable CGT event may be triggered,” Ryan said

“These include using cryptocurrency to pay for goods and services and conversion of cryptocurrency to cash.

“Additionally, exchanging cryptocurrency assets for another crypto asset and transferring crypto from one entity to another, for example from an individual to a trust controlled by that individual, are also potential triggers.”

Ryan says there are circumstances where crypto may be treated as trading stock rather than a CGT asset, however he adds that most crypto trades will result in a taxable event that will need to be well considered.

Ryan advises that tax consequences of cryptocurrency are discussed early when someone decides to start trading, or they could be in for an unwelcome surprise when it comes time to prepare their tax return.

“I always recommend that clients keep accurate and up-to-date records of all their investments, including crypto,” Ryan said.

“There are software platforms available we would recommend that allow taxpayers to keep comprehensive records in respect of cryptocurrency.

“Your Chartered Accountant will be able to quantify for you the estimated tax impost on the sale, and where required, consider any valid tax planning strategies that may assist.”

Traditionally, crypto was designed to be an untraceable form of currency, however Ryan says ATO systems are highly advanced in recognising transactions and crypto transactions should be viewed conceptually in the same way as any investment.

Ryan also advises that businesses accepting cryptocurrency as payment for goods and services should include the fair market value of the cryptocurrency in Australian dollars as part of ordinary income reporting.

It is the same process when receiving any other non-cash consideration under a barter transaction. Conversely, where you purchase business items using cryptocurrency, you may be entitled to a deduction based on the market value of the item acquired.

Ryan explains if taxpayers believe they may have incorrectly not disclosed crypto sales in prior years, early engagement with the ATO is very important and recommends anyone using or accepting crypto speak to their tax advisor as soon as possible.

About Ryan Taddeo

Ryan is a Chartered Accountant and Chartered Tax Advisor, providing tax advisory and compliance services to Australian businesses advising on start up structuring and guidance, tax litigation support, tax due diligence, restructures, fringe benefits tax, capital gains tax, cryptocurrency, and estate planning and deceased estates.

About Butler Settineri

For over 30 years, Butler Settineri has put its focus on clients and building relationships to deliver accounting and financial services to WA businesses successfully.

From accounting services to complex financial statements and advice, self-managed super funds and external audits, the team at Butler Settineri achieve an understanding by spending the time to get to know the people they work with.

For more information, please contact Butler Settineri on (08) 6389 5222 or mail@butlersettineri.com.au.