Tax return season is almost upon us, and crypto holders are eager to get the most out of this year’s returns.
A survey from the Senate Select Committee on Australia as a Technology and Financial Centre shows that 25% of Australians currently own, or have previously owned cryptocurrency, with a further 13% planning to buy cryptocurrency in the next 12 months.
This makes Australia one of the most significant adopters of Crypto on a per capita basis.
Where there is money to be made, there is tax to be declared.
H&R Block (NYSE:HRB) director of tax communications Mark Chapman says cryptocurrency is an asset like shares or property.
He says many people don’t realise they need to declare their crypto earnings.
“The most common mistake is not to include it all. People simply don’t understand it’s a capital gains tax, so it never occurs to them.”
With more than 20 years in the private and business tax sector, Chapman is well versed in his field.
“If people do declare it, they don’t understand the transactions are a tax on sale. So, when crypto is exchanged, gifted, traded or used to pay for goods and services, each of those has tax implications. You need to take all of those into account.”
Chapman says even if you make a loss, you still have to declare it.
“It’s not just selling a cryptocurrency for Australian dollars; it’s also transferring one unit of crypto to another. So, all trades or swaps need to be declared as capital gains tax”
To help with the process, H&R block created a tax guide to cryptocurrency, which can be downloaded on their website.
Chapman says he strongly suggests speaking to a registered tax agent when dealing with crypto, as there are penalties for not declaring.
“The penalties start at 25% of the tax that’s withheld, and if you’re a serial offender that can go up quite dramatically to 95%.”
According to H&R Block’s guide, some taxpayers mistakenly think they can buy up to $10,000 of cryptocurrency and avoid capital gains tax by taking advantage of the ‘personal use’ exemption.
“If you acquire something for your personal use, where the cost of the cryptocurrency is less than $10,000, then any Capital Gain is actually exempt from tax,” says Chapman.
Mistakenly relying on this exemption is one of the biggest errors people make when declaring, and should you choose to use it, be ready to provide some proof.
“This means if you intend to use it to buy a car or a house, or pay for a wedding, then you need to have very good documentation to prove you intended to use it for personal use.”
“The ATO tend to look very closely at those claims. People can’t assume if they’ve got less than $10,000 in cryptocurrency that the personal use exemption applies because it won’t, unfortunately.”
“Ignorance is no defence in the eyes of the ATO.”
– Duncan Bailey
This news is republished from another source. You can check the original article here