End of Financial Year Crypto Tax Preparation
The end of the financial year is usually one of the most strenuous times for taxpayers, as everybody scrambles to get their personal financial affairs in order, with the ultimate aim of keeping the tax payable to a minimum.
The situation becomes even more critical when an individual is a cryptocurrency trader or investor.
Since the cryptocurrency space is an ever-changing sector that is still in its fledgling stage, there is a scarcity of hard and fast rules of cryptocurrency taxations in most countries. In the case of a country like Australia, the ATO is responsible for framing rules for most tax deductible assets.
It should be remembered, that the ATO has maintained a firm stance against any unlawful methods of tax preparation and the offender might face serious legal consequences.
Tax Preparation for Cryptocurrencies
When it's that time of the year, traders, investors and small business owners start looking for the receipts and gather their details to lodge taxes. This is not helped by the fact that the ATO's guidelines "Tax Treatment of Cryptocurrencies" is not clear in some areas. People are nervous about their taxation planning for this EOFY because of the last federal election that resulted in the modifications in taxation, superannuation and negative gearing. Keeping this in mind we have gathered some basic guidelines that would help crypto traders increase their savings by minimising tax.
Understanding whether you are an investor or Trader
Investing and trading in cryptocurrencies are done almost in tandem by individuals, mostly to achieve a financial benefit. However, when it comes to taxation, traders and investors are treated very differently. Hence it is crucial that you understand your personal objectives as well as the different tax implications in each case.
Maintaining Records of Cryptocurrency Related Activities
The next step involves maintaining detailed and updated records of whatever transactions a person has done. Although using spread-sheets are handy, seeking the help of professional crypto tax assistance service providers ensures that no stones remain unturned during tax liability calculation. There are many different strategies that may assist you in achieving the best outcome, you won't find these in a spreadsheet.
Reporting of All Taxable events
This is one sector where most individuals make mistakes and face legal hassles later on. Understanding what a taxable event is in the case of cryptocurrencies is essential. According to the ATO, all crypto to crypto trades are classified as taxable events as it considers cryptocurrencies as assets and as a result deems it to be taxable just like listing shares on a stock exchange.
The last day of June falls on a Saturday, so all strategies or contributions will be decided on or before the 30th of June. Always remember that tax planning is completely different from tax avoidance. The former may help you to be liable for paying less tax and the latter might cause some serious legal issues for you, since it's a deliberate exploitation of the government's tax system.
Please ensure you are receiving the best advice, contact one of our crypto tax specialists.
The material published electronically in this article is general in nature and does not constitute financial advice. We do not guarantee that the information is complete or correct. We do not accept any responsibility for loss or damage suffered by any person or body relying directly or indirectly on any information contained within this site.
We do not accept any liability for any financial decisions made on the basis of the information provided. We recommend you seek professional advice, and take into account your particular investment objectives, financial situation and individual needs before proceeding with any financial decisions.
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