Tax on cryptocurrency earnings has become an important factor at year’s end, which many UK cryptocurrency investors will soon find out as their 31 January deadline approaches.
New regulations created in 2018 means that this month’s tax returns will need a little more care when completed by crypto enthusiasts and exchanges as well, although companies are still awaiting more details.
Published on 19 December, the comprehensive guide detailed the circumstances or instances in which a crypto holder, trader or someone who receives payment in the form of crypto would need to pay taxes. At present, Her Majesty’s Revenue and Customs (HMRC) guidelines refer simply to individuals. Tax guidelines for crypto assets in businesses or utilized by businesses are due to be published at some unspecified point in the future. HMRC also notes that the “tax policy may evolve as the sector develops”.
In an attempt by HMRC to tighten up on profits incurred through cryptocurrency trading, those filing their returns this month will have to give specific details of some of their transactions including type of cryptocurrency asset, date of the transaction and type, number of units, the value of the transaction and the cumulative total of units. HMRC have said that they will also be requiring bank statements and wallet addresses as part of the 2018 return.
The Australian Tax Office (ATO) has suggested this month that it needs public input regarding its current legislation regarding cryptocurrency tax obligations. This is partly due to an increased interest in cryptocurrency in general within Australia over the last twelve months.
A public comment process has been initiated in order to examine taxpayers concerns and examine issues which may impact on consumers ability to calculate capital gains or losses for tax purposes.
The ATO points out that private or company tax returns need to incorporate cryptocurrency transactions and that taxpayers will now need to provide details regarding these, such as Australian dollar equivalents and other details regarding the parties involved in the transaction.
Like Japan, Australia sought to strengthen its money laundering laws in 2017, which threw focus on the regulation of digital currencies within Australia. This was a clear shift from its 2015 “hands-off” approach to the use of cryptocurrencies.
Regulation of cryptocurrency has been an issue over the past few years. The Australian government now maintains that transacting with Bitcoin is similar to a barter, being neither money nor foreign currency and as such, is not a financial supply for goods and services purposes. The unpopular tax on Bitcoin purchases will now be lifted in July of this year and Australians will no longer have to pay goods and services tax (GST) on cryptocurrency purchases.
From a consumer perspective, the future seems promising for Australians despite further regulation of cryptocurrencies within the country. Senators from both leading political parties in Australia (both Labour and the Coalition) have called for the Reserve Bank of Australia to accept cryptocurrencies as an official form of currency.
Moves towards regulating the Australian tax system by seeking public consensus indicates that the nation is possibly considering how to incorporate digital currency into the mainstream as cryptocurrencies become more widely used.