Australian Tax Taskforce Will Monitor Crypto Traders
The taxman Down Under is not taking any chances when it comes to the collection of cryptocurrency gains. It has been reported that the authorities are now interested in establishing a taskforce which will monitor the trading of cryptocurrencies.
This shows that although governments were at once dismissive of cryptocurrencies, they are now taking the opportunity to tax profits on those lucrative gains. But what exactly are they trying to do and how will it affect users?
"Consulting" on Tracking Solutions
According to the disclosures by the Australian Taxation Office (ATO), they are consulting with other participants about the best way to track these transactions. They went on to say
We are consulting with key stakeholders who have expressed an interest in tax issues relating to cryptocurrencies
They claimed that they will "explore common queries and practical issues" as distributed ledgers have no central data storage. This is only partly true though as although users information is not stored centrally, all of the transactions exist on the blockchain and can be tracked using blockchain audits.
The ATO was also trying to team up with banks and other government agencies in order to keep track of the traders. This is indeed a common thread globally with counterparts such as the IRS targeting Coinbase for some user information.
How Will it be Taxed?
Although cryptocurrency users may think of this as another example of an invasion of privacy by the state, the government wanted you to know that that the ATO's strategy is "supporting the community in understanding the tax implications".
Hence, in the case of the Australian trader, what are the tax implications of crypto?
Cryptocurrencies are not classed as money or foreign exchange in Australia. They would then be considered an asset or good. Usually, the sale of this would incur a sales tax but thanks to a double taxation relief bill, that is no longer the case.
Cryptocurencies are still subject to Capital Gains Tax (CGT) on the appreciation in value of the crypto holdings. This is of course clear enough for those users who merely hold cryptocurrencies. It becomes a bit trickier for those people who receive the coins in exchange for another asset.
For example, if someone was to sell a house for Bitcoin at a profit, they would have to pay capital gains tax. However, if the Bitcoin was to appreciate right after that, they may have to pay tax not only on the house but also on the Bitcoin.
General Assault on Crypto
Although targeting tax evasion may be considered a noble cause, it does seem as if Australia is becoming a pretty unfriendly place for cryptocurrency traders.
For example, there have been numerous reports of users and traders who have had their bank accounts closed due to the fact that they were transacting in Bitcoin.
It looks as if the centralised forces that want to control Bitcoin are not co coordinating their actions. If they would like to tax and regulate Bitcoin that is one thing, but punishing users by closing their banks is mildly counterproductive.
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Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.