The Australian Taxation Office is actively working to dispel the myth that cryptocurrency gains are tax-free. According to ATO,over 600,000 taxpayers have invested in cryptocurrency in recent years, with many failing to disclose their capital gains. Although bitcoin technology is relatively new, the tax laws that apply to cryptocurrency investors are well-established under capital gains tax provisions.
The capital gains appear to be nothing short of astounding on paper. Anyone with a stake in cryptocurrency. Bitcoin would have seen the value of their investment increase by more than 250% over the length of the 2020-2021 fiscal year.
The major drawback is the capital gains tax. In general, whether you purchase, trade, or swap for fiat cash, or exchange one cryptocurrency for another, you are liable to CGT and must disclose the transaction.
Tim Loh, ATO’s assistant commissioner, says that while cryptocurrency looks to function in an anonymous digital environment, we closely track where it connects with the real world using data from banks, financial institutions, and cryptocurrency online exchanges to follow the money back to the taxpayer.
The ATO haS a data-matching scheme in place to track bitcoin transactions, and as part of the program, it collects bulk records from Australian-designated service providers. The information submitted to the ATO includes cryptocurrency wallet information.
Crypto-currencies purchased as a financial investment are regarded as a type of property and hence an asset for CGT purposes. ATO encourages that agents use pre-fill reports available via online agent services. ATO also considers not disclosing income from cryptocurrency gains to be tax fraud.
Joni Pirovich, special counsel on tax at law firm Mills Oakley, says a taxonomy of diverse types of digital assets, the high-level legal and tax implications for both issuers and taxpayers is required. She believes if there was a standard resource that lawyers and accountants could access, had been created by a multi-agency working group and was contributed to by industry professionals, it would help raise the quality of accounting, tax advice, and compliance across Australia.
In Australia, cryptocurrency transactions are taxed per-existing taxation law. Australia is assisting in the development of a tax transparency framework for crypto assets and digital money products at the Organization for Economic Cooperation and Development. The proposed approach aims to mitigate the dangers associated with these products’ lack of transparency.
Hema Raman, Australian Securities, and Investments Commission says that essentially, a crypto asset is a financial product if it contains elements that are very similar to the features of a managed investment plan. The issuer must hold the necessary financial services license. Any market or platform that trades that specific crypto asset will then require an Australian market license.
Although Bitcoin was the first, there are currently hundreds of cryptocurrency assets that are actively traded by investors all over the world. The ASIC is in charge of regulating them. Australians may soon be able to acquire exchange-traded products (ETPs) that provide ordinary investors with exposure to crypto-assets.
There are many different types of crypto assets, some of which are financial items regulated by ASIC and others that are not. There is a significant grey area. Exchange-traded vehicles are financial items and fall under the purview of ASIC.
The purpose of the consultation paper on ETPs is to ensure that ASIC determines, the appropriate standard of conduct. The goal is to place enough protective rails around it. When compared to directly accessing crypto, a product that provides exposure to crypto assets through a regulated platform has a field of protection.