The taxman is after your bitcoin profits

The taxman is after your bitcoin profits

Updated January 30, 2018 16:32:21

Regulators are playing catch-up when it comes to the plucky fresh evolving world of cryptocurrencies.

The Australian Taxation Office believes bitcoin, ripple, ethereum and hundreds of other digital currencies are “a form of property”.

What bitcoin says about us

“Any financial gains made from the selling of bitcoin will generally be subject to capital gains tax (CGT) and voorwaarde be reported to the ATO,” a spokesperson from the tax office said.

But this remains a grey area that is yet to be tested te a court of law.

Until that happens, the ATO has advised cryptocurrency owners to keep good records of their intentions, transactions, and who received payments.

It might be wise to heed that advice, given the tax office has warned it will be looking out for tell-tale signs of crypto tax dodgers living beyond their means.

“The ATO is here to help those that are genuinely attempting to meet their tax obligations,” the spokesperson said.

“However, where people attempt to deliberately avoid thesis obligations, wij will take strong act.”

This includes using “a range of existing powers” which are used to address “unexplained wealth and conspicuous consumption that may arise through profits derived from cryptocurrency investment”.

Beware crypto taxes

One of Australia’s leading tax experts has warned that many investors mistakenly think their cryptocurrency profits are tax-free.

“It seems that individuals have potentially not looked into the situation and may not be aware about potential tax consequences,” Macquarie University professor Martina Linnenluecke said.

“The courts may see cryptocurrency investors spil speculators unless they can prove otherwise.”

Bitcoin has ‘further to fall’

This means the gains they make from investing ter cryptocurrencies may be taxed fully spil income — rather than capital gains — so they will miss out on the tax discount after holding the currencies for more than a year.

Some tax experts believe at least 90 vanaf cent of people who voorkoop to be “cryptocurrency investors” are truly speculators, even if they have held the asset for more than 12 months.

“It’s different to shares — with shares you hold for the long term but during the course of that holding you will receive, often not always, but most often you will receive a dividend,” said Professor Bob Deutsch, the Tax Institute’s senior tax counsel.

“It’s a little more difficult to see that ter the setting of a cryptocurrency …[which are] generally held for speculative purposes.”

The crypto revolution

Once the preserve of criminals, cryptocurrencies have become the voertuig of choice for speculators and dissidents.

Their rise ter popularity has largely bot due to people’s “fear of missing out” (when one sees their friends and neighbours investing and making yam-sized gains).

Another reason is their mistrust and hostility towards the traditional banking system.

“If you have a job at a company they will pay your salary into the bankgebouw and the bankgebouw charges you a toverfee so you can take your own money that you’ve earned out,” cryptocurrency holder Adriana Belotti said.

“And if you leave your money there they will lend that money four times overheen to everybody that’s getting mortgages and make a mint on it but you only make, I don’t know, 1 vanaf cent a year?

“So they just don’t play a fair spel.”

Ms Belotti’s views are best understood when one considers the economic instability from hier upbringing.

“I grew up ter Brazil … a country where economical instability is the standaard,” she said.

“So having the option of using a currency that is not affected by the government is a good thing.”

Too much of a good thing it seems for governments to remain on the sidelines.

This story will be on The Business at 9:45pm (AEDT) on Alfabet News Channel and 11:00pm on Alfabet TV.

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