Cryptocurrency has taken the world by storm! This ever-evolving and ever-changing “currency” has had a lot of misconceptions spread around it due to its fast-paced acceleration into the world of business and investing.
If you’ve invested in cryptocurrency as an Australian tax resident, it’s important to stay informed about ATO tax rules and avoid common misconceptions.
In this blog post, we look at some of the most common myths you should not fall for.
Myth 1: Cryptocurrency Income Is Tax-Free
This is a common misconception. Income earned from cryptocurrency is subject to tax in Australia. The ATO views cryptocurrency as an asset, and any gains made from selling or exchanging it as an investment for the long run is treated like capital gains.
If you’re actively participating in regular cryptocurrency trading, you are required to account for your business profits from this currency and it will affect your possible business tax refund.
Myth 2: Only Converting Cryptocurrency To AUD Is Taxable
It’s not just when you convert cryptocurrency back to Australian dollars that you have to pay tax. Any gain or loss made from exchanging one cryptocurrency for another is also subject to tax. The ATO treats cryptocurrency exchanges like any other asset, and the same rules apply.
Myth 3: The ATO Can’t See My Cryptocurrency Holdings
The ATO can see your cryptocurrency holdings, thanks to data-sharing agreements with Australian and global exchanges. So it’s important to be transparent about your holdings in your tax return. Failure to report your cryptocurrency earnings can result in penalties and interest charges.
Myth 4: I Don’t Need A Tax Agent For My Cryptocurrency Taxes
This is a particularly alarming myth, as accountants and tax experts worldwide have just started becoming accustomed to the laws and regulations regarding crypto.
Cryptocurrency tax laws can be complex and confusing, so it’s important to seek advice from a tax agent who has experience with cryptocurrency taxes. They can help you navigate the regulations, claim eligible deductions, and maximise your tax refund.
Understanding ATO tax rules for cryptocurrency is crucial for avoiding penalties and maximising your tax refund. Don’t fall for these common misconceptions, and seek advice from a cryptocurrency tax agent if you’re unsure about your cryptocurrency tax obligations. Accountants Direct has an experienced team of tax agents to help you comply with ATO tax rules and maximise your or your business’ tax refund. Reach out to us here!
As more Australians dive into cryptocurrency, it’s important to be aware of the tax implications to avoid any potential issues with the ATO. Don’t fall for common misconceptions, such as assuming income from cryptocurrency is tax-free. Working with an experienced tax agent can help you correctly manage your holdings and avoid any liabilities.
