Tax time is just around the corner. For many, this will mean the same routine of getting receipts and finances together in a scramble for an accountant to look at.
However, if you’re one of the
million Australians who’ve dabbled in cryptocurrency recently, you might need to rethink how you approach your taxes.
This is because crypto is taxable. According to Tony Dhanjal, Head of Tax at crypto
tax accounting platform Koinly, there are four main ‘taxable’ moments crypto dabblers will encounter throughout their investing journey: selling, exchanging, gifting and spending.
“Additionally, you’ll pay income tax when you’re seen to be earning an additional income through crypto. For example, from mining crypto, staking rewards or partaking in various decentralised finance activities,” Tony explained.
Failing to report your crypto activity during tax time or submitting a deliberate understatement can result in a severe penalty —here are three essentials to consider before doing your taxes.
When exactly is tax-time?
The current Australian tax year runs from 1st July 2021 to 30th June 2022. Tony affirmed that this means that all of your crypto trades and transactions for this period need to be reported by no later than 31st October 2022 (if lodging your taxes) and by 31st March 2023 if lodging through an accountant.
What will the ATO require from you?
“The ATO will require you to keep detailed records of your crypto transactions for five years in case of an audit. This includes the date and prices you bought and sold (if applicable) your Crypto amongst other data points,” said Tony.
If you find it tricky to keep on top of your trades, using a portfolio tracker like Koinly can assist in planning around tax time to make things a little easier.
Tony also shared that the ATO will ramp up efforts to track crypto transactions this year in the lead-up to tax time due to the increased number of investors. The ATO has crypto transaction data dating back to 2014, so it’s best to ensure that your investments have been noted.
How much crypto do you have?
Tony strongly suggests taking stock of how many exchanges, wallets or chains you transact on/with are reported. This includes centralised, decentralised, custodial, non-custodial, hot or cold, Ether, ERC-20 tokens, BEP-20 tokens or NFTs.
“Capital gains tax rates are aligned to Income tax rates in Australia and are as high as 45% for short term gains. However, there is a welcome tax break for longer-term (12 months or greater) holds,” he added.
“You can get an exemption from capital gains tax if you hold cryptocurrency as a personal use asset. If you purchase no more than $10,000 of cryptocurrency to directly buy something else with crypto, you’re eligible for this exemption.”The post 3 Things to Keep In Mind at Tax Time if You Invest in Crypto appeared first on Lifehacker Australia.
