Regulations

Crypto tax guidelines inconsistent as Australians file their crypto gains for the first time

The tax filing season in Australia is fast approaching. But, there is a problem. Cryptocurrency traders are having a hard time understanding which part of their crypto gains or losses fall under the tax rules set by the Australian Taxation Office (ATO) and as it is already turning out, a legal intervention may be unavoidable as Australians file their crypto gains for the first time.

Cryptocurrency traders in the country are exempted from paying tax if they use it for personal use and their crypto holding should be worth not more than 10K US dollars. However, this exemption seems unclear of what can be referred to as ‘personal use’. Also, “the longer the period of time that a cryptocurrency is held, the less likely it is that it will be a personal,” as noted by the Financial Review.

For the ATO, cryptocurrency is a property not a currency and therefore it attracts a capital gains tax (CGT) when profits are made out of a sale.

In one particular case, Max, a Melbourne lawyer is putting up a fight with the ATO after he became an instant millionaire in late 2017 after selling his cryptos when the prices were very high. Max invested in ethereum back in 2014 although to him, at that time, “It wasn’t an investment, we just bought them [ether] because we really believed in it; we wanted to be a part of it.” When the prices peaked in late last year, Max sold part of his fortune netting $500,000 which the ATO is eagerly waiting to see as he files his tax returns for the year.

But for Max, he considers using the cryptos for personal use and therefore wants the ATO to issue a private binding ruling to confirm he qualifies for the personal use exemption. For this to happen, he will have to prove what constitutes ‘personal use’

Additionally, the ATO has crypto ‘investor’ and ‘trader’ in its guidelines with a very faint line between the two. An “investor” is considered as an Australian resident who has not used their cryptocurrency for more than 12 months.
According to the Financial Review, “there is no bright-line test to determine precisely when one becomes a trader, in such cases gains will be taxed as income.”

With such inconsistencies, a legal intervention may be unavoidable as Australians file their crypto gains for the first time

Do you think Australian will turn to the courts for clearer tax guidelines?

Let us know your thoughts in the comments section below.

coinmag

Philip is an experienced blogger keen on staying updated with trends and news surrounding the blockchain and Bitcoin space. With several years of freelance experience in various industries, Philip brings his knowledge and experience into the crypto space.

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