The Australian Taxation Office (ATO) announced Monday that it will focus on digital assets this year as it expects to see more Aussies report capital gains or losses in their tax returns.
Aussies Are Engaging With Crypto
The tax regulator treats crypto assets as digital property, hence Aussies who sell their digital assets, including non-fungible tokens (NFTs), are expected to calculate and record their capital gains or losses in their tax returns.
For clarity, capital gain or capital loss is the difference between the price of an asset at the time it was purchased and the price at the time it was disposed of. According to the ATO, disposal occurs when the digital asset holder sells, gifts, trades, converts, or uses it to obtain goods or services.
The ATO’s Assistant Commissioner Tim Loh said the tax office is aware that many Aussies are engaging with crypto assets, hence it is important for people to understand how it affects their tax obligations in order to achieve correct tax reporting.
Record Keeping for Crypto Transactions
The ATO also intends to focus on three other key areas – record-keeping, work-related expenses, and rental property income and deductions.
Aussies are expected to keep good records of their crypto transactions, whether they are using digital assets for investment, personal use, or in business. Some of the records crypto investors should keep include receipt of purchase or transfer of assets, exchange records, and digital wallet records.
ATO Warns Crypto Investors
Anyone who deliberately reports inaccurate capital gains on their crypto assets may face tax penalties from the ATO after an audit.
“For those people who deliberately try to increase their refund, falsify records or cannot substantiate their claims, the ATO will be taking firm action to deal with these taxpayers who are gaining an unfair advantage over the rest of the Australian community who are doing the right thing,” Loh said.
Meanwhile, the ATO has previously warned crypto traders about the risks they face by reporting incorrect figures for tax purposes. At the time, CryptoPotato reported that the regulator had contacted over 350,000 crypto investors via email to warn them about discrepancies in their tax reporting.