Jacqueline Blondell | June 2021
This article was current at the time of publication.
The explosion in cryptocurrency trading has prompted the Australian Taxation Office (ATO) to run a ruler over any capital gains tax (CGT) omissions on the assets in the 2020–21 tax year.
Cryptocurrency investment joins property and share trading as key CGT areas on which the ATO is now focused.
“In recent years we’ve had around 600,000 people invest in cryptocurrency and it’s increasing, given the way prices have been skyrocketing in the last few months,” says Tim Loh, ATO Assistant Commissioner, Individuals and Intermediaries.
The concern is many taxpayers think cryptocurrency gains are tax-free or only taxable when converted to Australian dollars.
According to Loh, they need to be aware of other transactions that create a taxable gain or loss, including buying, gifting or trading between cryptocurrencies.
He warns buying goods and services can create a taxable transaction, and lack of clarity around the crypto market may create a belief that such trades are above the law.
“We are alarmed that people think the anonymity of cryptocurrency provides license to ignore tax obligations.
“From an ATO perspective, we track it and when it enters the ‘real’ world in data from banks or cryptocurrency agents we will be following the money back to the taxpayer.
“We know cryptocurrencies are complicated. Our focus is helping people get it right, whether it’s CPAs, other accountants, or individuals.”
This year the ATO will write to 100,000 taxpayers with cryptocurrency assets to explain their tax obligations and ask them to review previous returns. Some 300,000 taxpayers will also be prompted to report CGT gains and losses.
Work-related expenses in a COVID-19 world
Work-related expenses are an ongoing focus of the tax regulator, especially given the changes in work patterns COVID-19 caused during 2020.
“We want people to claim what they are entitled to – nothing more, nothing less,” Loh says. He notes that last year saw an increase in claims for working from home expenses, while claims for car travel and work-specific clothing decreased.
With April 2021 Australian Bureau of Statistics figures showing 36 per cent of people working at least one day a week from home, it looks like this trend will continue.
“You can’t be in two places at once,” Loh says. “We expect working from home expenses to go up and to see a reduction in expenses for PPE [personal protective equipment] clothing [and travel expenses].”
He recommends accounting practitioners alert clients to the My Deduction tool in the ATO app which can be used to track expenses throughout the year and can be shared with tax agents.
“That information makes it a lot easier for everyone concerned and [helps to ensure] everyone is getting the deductions they are entitled to.”
Working from home: the shortcut method
The ATO has acted on positive feedback from agents last year and extended its temporary shortcut method for calculating working from home expenses.
Taxpayers simply need to keep a record (through diary entries, timesheets, or roster) of the number of hours per week worked from home.
“The method’s all-inclusive, so it covers all your running costs, cleaning, cooling, heating, lighting and internet and telephone costs and depreciation of home office equipment like your iPad and laptop,” Loh explains.
Practitioners can also advise clients to use one of two other methods, depending on their individual circumstances.
Airbnb gains still taxable
With investment properties still under scrutiny by the ATO, Loh says: “Obviously [the amount of income] may have decreased because of COVID-19 but nonetheless it’s important – if you’ve received it – that it’s included.”
Permissible deductions for investment properties include borrowing expenses and capital expenditure on renovation and general upkeep.
Interest claims during periods when the property isn’t rented shouldn’t be included, nor should redrawing on loans for personal expenditure.
“We see these mistakes being made every year, and I just want to remind accountants there’s an obligation to exercise due care,” Loh continues.
“It’s important they are up-to-date with any changes in taxation law.”
ATO follows the money
As practitioners know, the ATO receives data from a range of organisations, banks, state revenue offices, land title offices, motor vehicle and share registries, accommodation sharing platforms and cryptocurrency platforms.
It uses this data to pre-fill returns and prompt people about their income and assets at lodgement.
“We will also match the income we receive to people’s individual returns to ensure they are declaring all their income,” Loh says.
“If people have made a genuine error in their returns, they should contact us as soon as possible for assistance. If it’s a simple mistake they can self-amend the return online.”
Pre-filled forms help the process
Pre-filled returns containing bank and other information such as health insurance will be ready by the end of July.
Loh notes: “If clients are lodging before then, it’s really important that CPAs make some extra time to [ensure] everything’s included, [especially] given many people have had to receive JobSeeker and JobKeeper or participated in the gig economy.
“We understand CPAs will be under pressure to lodge early because there was a tax cut in October, but we want to remind them to take that extra time and ask that extra question.”
Income generated from trusts is treated differently to other sources of revenue. CPA Australia’s guides to trusts explain how to approach this.
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