Cryptocurrency under the microscope this tax time
The ATO is concerned that many taxpayers believe their cryptocurrency gains are tax-free, or only taxable when the holdings are cashed back into Australian dollars.
ATO data analysis shows a dramatic increase in trading since the beginning of 2020, and has estimated that there are over 600,000 taxpayers that have invested in crypto-assets in recent years.
This year, the ATO will be writing to around 100,000 taxpayers with cryptocurrency assets explaining their tax obligations and urging them to review their previously lodged returns. The ATO also expects to prompt almost 300,000 taxpayers as they lodge their 2021 tax return to report their cryptocurrency capital gains or losses.
Gains from cryptocurrency are similar to gains from other investments, such as shares. CGT also applies to the disposal of non-fungible tokens (‘NFTs’).
The ATO matches data from cryptocurrency designated service providers to individuals’ tax returns, helping it to ensure investors are paying the right amount of tax.
“The best tip to nail your cryptocurrency gains and losses is to keep accurate records including dates of transactions, the value in Australian dollars at the time of the transactions, what the transactions were for, and who the other party was, even if it’s just their wallet address,” Assistant Commissioner Tim Loh said.
Businesses or sole traders that are paid cryptocurrency for goods or services will have these payments taxed as income based on the value of the cryptocurrency in Australian dollars.
Holding a cryptocurrency for at least 12 months as an investment may mean the holder is entitled to a CGT discount if they have made a capital gain.
Super Guarantee rate rising from 1 July 2021
The super guarantee rate will rise from 9.5% to 10% on 1 July 2021, so businesses with employees will need to ensure their payroll and accounting systems are updated to incorporate the increase to the super rate.
ATO warns on ‘copy/pasting’ claims
The ATO is alerting taxpayers that its sights are set on work-related expenses like car and travel claims that are predicted to decrease in this year’s tax returns.
Assistant Commissioner Tim Loh noted that COVID-19 has changed people’s work habits, so the ATO expects their work-related expenses will reflect this.
“We know many people started working from home during COVID-19, so a jump in these claims is expected,” Mr Loh said.
“But, if you are working at home, we would not expect to see claims for travelling between worksites, laundering uniforms or business trips.”
The ATO will also look closely at anyone with significant working from home expenses, that maintains or increases their claims for things like car, travel or clothing expenses:
“You can’t simply copy and paste previous year’s claims without evidence.”
“But we know some of these unusual claims may be legitimate. So, if you explain your claim with evidence, you have nothing to fear.”
Car parking threshold for 2022 FBT year
The car parking threshold for the FBT year commencing on 1 April 2021 is $9.25.
This replaces the amount of $9.15 that applied in the previous FBT year commencing 1 April 2020.
Luxury car tax thresholds
The ATO has updated the luxury car tax (‘LCT’) thresholds for the 2021/22 financial year.
The LCT threshold for fuel efficient vehicles in 2021/22 is $79,659 (up from $77,565 in 2020/21) and the LCT threshold for other vehicles in 2021/22 is $69,152 (up from $68,740 in 2020/21).
Editor: Note that these thresholds determine whether LCT is payable, and are different from the luxury car depreciation limit of $60,733 for 2021/22.
New ATO data-matching programs involving property & cryptocurrency
The ATO has advised that it will engage in two new data matching programs dealing with property transactions, as outlined below:
▢ The ATO will acquire property management data from property management software providers for the 2018/19 through to 2022/23 financial years (relating to approximately 1.6 million individuals); and
▢ The ATO will acquire rental bond data relating to approximately 350,000 individuals from state and territory rental bond regulators bi-annually through to 30 June 2023.
▢ the ATO will acquire account identification and transaction data from cryptocurrency designated service providers for the 2021 financial year through to the 2023 financial year inclusively (relating to approximately 400,000 to 600,000 individuals each financial year).
Rent or lease payment changes due to COVID-19
The ATO has provided updates regarding the tax implications when a landlord gives, or a tenant receives, rent concessions (such as waivers or deferrals of rent) as a result of COVID-19.
For example, the ATO provides the following advice for tenants that have received a rent waiver.
If the waived rent is related to a past period of occupancy that the tenant has already incurred and claimed a deduction for, they are still entitled to that deduction.
However:
▢ if they have already paid the incurred rent and it has been waived and refunded to the tenant, they will need to include this amount in their assessable income when they receive it; or
▢ if they have not already paid the incurred rent and it has been waived, the rent waiver will be a debt forgiveness. When such a debt is forgiven, the tenant will make a gain. The amount isn’t usually included in the business’s assessable income — it is instead offset against amounts that could otherwise reduce the business’s taxable income.
If the waived rent is related to a future period of occupancy, they will not be entitled to a deduction for that amount.
Editor: These types of rent concessions can give rise to various tax implications for both tenants and landlords (including GST implications), so please contact our office if you would like assistance in this regard.
Lost, damaged or destroyed tax records
The ATO knows that many taxpayers are facing lasting impacts left in the wake of natural disasters, so if they find their records have been lost or destroyed, whether in cyclones, floods or bushfires, the ATO can help. According to ATO Assistant Commissioner Tim Loh:
“If you have a myGov account linked to the ATO, you’ll be able to view some of your records, including income tax returns, income statements and previous notices of assessments. If you lodge through a registered tax agent, they can also access these documents on your behalf.”
Government agencies, private health funds, financial institutions and businesses provide information to the ATO which is available to tax agents and automatically included in returns by the end of July.
If taxpayers have lost receipts due to a natural disaster, the ATO can accept reasonable claims without evidence, so long as it’s not reasonably possible to access the original documents (although the taxpayer may be required to tell the ATO how they calculated the claim).
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.