Sebastian Sinclair

<div id="highlights-block_62826dd6a6e29" class="highlights">
 <ul>
 <li>The Australian Tax Office has issued a warning to the country&#8217;s crypto investors to correctly declare their capital gains or losses</li>
 <li>Crypto is one of four main areas the agency is focusing on which also includes record keeping, work related expenses and rental property income</li>
 </ul>
 
</div>



The Australian Tax Office (ATO) has renewed calls to the country&#8217;s crypto investors warning them to report capital gains or losses on their crypto trading activity.



In a <a href="https://www.ato.gov.au/Media-centre/Media-releases/Four-priorities-for-the-ATO-this-tax-time/" target="_blank" rel="noreferrer noopener">statement</a> on Sunday, the ATO&#8217;s Assistant Commissioner Tim Loh said his agency will focus on four areas including record keeping, work-related expenses, rental property income and deductions as well as capital gains from crypto assets, property and shares.



“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year,&#8221; said Loh.



The warning follows a series of similar messages from the agency in recent years. Last year, the ATO – the governmental agency that oversees the country&#8217;s federal tax collection — issued <a href="https://www.news.com.au/finance/money/tax/tax-returns-how-the-ato-will-target-cryptocurrency-investors/news-story/e4f275d02bd5eb0e0ee773b9e2f9642e" target="_blank" rel="noreferrer noopener">100,000 letters</a> to crypto holders, reminding them of their tax obligations. The agency also asked a further 300,000 individuals to correctly report their crypto earnings.



The agency claims it has stepped up its capacity to monitor individuals&#8217; crypto trading activity including soliciting information from exchanges as well as utilizing its &#8220;<a href="https://www.ato.gov.au/General/Gen/Cryptocurrency-2014-15-to-2022-23-data-matching-program-protocol/" target="_blank" rel="noreferrer noopener">data-matching program protocol</a>.&#8221;



Under Australian tax law, those working within the country need to record their capital gains or losses whenever they dispose of an asset, which in later years has included crypto.



A capital gain or capital loss is the difference between what an investor pays for the asset at the time of purchase and what an investor receives when they dispose of it.



Australians are unable to offset their crypto losses against their salary and wages, the commissioner cautioned. 



Loh also said his agency was aware that &#8220;many&#8221; Australians have been actively buying, selling or exchanging crypto including NFTs in this financial year.



The country&#8217;s financial years run from July 1 to June 30 the following year, meaning domestic traders and investors have roughly 45 days to correctly file a return.



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Australian Tax Office Cautions Crypto Investors to Declare Capital Gains

Casey Wagner

<div id="highlights-block_6201889b95c43" class="highlights">
 <ul>
 <li>Investors may not have earmarked enough cash to meet crypto tax bills</li>
 <li>For many retail traders, it’s difficult to first discern how much they owe</li>
 </ul>
 
</div>



As tax season ramps up, cryptocurrency accountant eyes are on looming tax bills that investors may not have earmarked enough cash for.



“If people are liquidating coins to come up with the cash for taxes for 2021, that also creates a taxable event for 2022,” said Shehan Chandrasekera, head of tax at Coin Tracker. “It’s going to get messy.”&nbsp;



As retail investors report 2021 cryptocurrency trading activity, they might be surprised by their tax bill — particularly newcomers, Ledgible CEO Kell Canty said.



“Come April 15, a lot of investors are going to see that they had a taxable event where they either sold crypto for crypto or sold crypto for USD, and they didn&#8217;t allocate any portion of that to satisfying the capital gains,” Canty said.



It can be complicated to track and report gains, Canty said, especially in cases where investors shifted profits from one token to another. The recent selloff has compounded those concerns, leading to the possibility that underwater, cash-starved investors won’t be able to satisfy their tax obligations.



“It&#8217;s unfortunate,” Canty said. “That&#8217;s why people need to be more thoughtful about planning that and using tools to track all of their crypto across all different exchanges and wallets and custodians and DeFi protocols to get a sense for the realized and unrealized gains that they have.”



Aside from figuring out how to pay taxes, retail investors may have a hard time pinning down how much they owe, according to Chandrasekera.



“Reporting is a huge problem right now, because exchanges are doing different things,” Chandraseker said. “If you take a look at centralized exchanges, they issue, I would say, four different types of tax forms, depending on how they interpret the existing tax codes, given the gray area, so people are very confused.”



Investors using decentralized exchanges or more than one exchange may have a particularly difficult time.



“Exchanges only have visibility into what&#8217;s happening inside that exchange,” Chandrasekera said. “But to figure out your taxes correctly, you need to connect all your wallets and exchanges and figure out that actual capital gain or loss.”



There is precedent for retail investors liquidating holdings for the tax man, said Jordan Bass, owner of Taxing Cryptocurrency.



“In 2018, there was a big top in crypto markets, then the price retraced in February, we had a little bit of a pump into March and then in April, when we were leading into tax planning, we saw a significant retracement,” Bass said. “I think maybe there was some correlation.”



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