2022 Cryptocurrency Tax Return: What the ATO Should Crack Down on This EOFY

Cryptocurrency traders will once again be in the Australian Taxation Office’s crosshairs this tax season, according to industry experts.

Tax season is right around the corner, with the focus likely on tax and cost-of-living offsets for low- and middle-income earners.

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But leading tax experts warn there are hidden pitfalls that could catch unexpected taxpayers.

H&R Block’s Director of Tax Communications, Mark Chapman, said one of the biggest topics on the ATO’s earnings list is cryptocurrency traders.

“The ATO will also take a closer look at the booming market for investing in cryptocurrencies like Bitcoin,” he said.

“More and more taxpayers are jumping on the bandwagon and the ATO believes that some of them are not reporting the profits (and in some cases losses) they make on their investments.

“Remember that investing in cryptocurrencies may result in capital gains tax on profits. Traders may be taxed on their profits as business income.

He said the ATO estimates that there are between 500,000 and one million Australians who have invested in crypto-assets.

“To aid in their research, the ATO is collecting records en masse from designated Australian cryptocurrency service providers as part of a data matching program to ensure that people who trade in cryptocurrency are paying the correct amount of tax.

“The data to be provided to the ATO will include information on buying and selling cryptocurrency. The data will help identify taxpayers who do not properly disclose their income details.

Tax season is right around the corner, with the focus likely on tax and cost-of-living offsets for low- and middle-income earners. Credit: Getty Images

Last year, the ATO issued a thinly veiled warning to crypto traders that they should report their activities.

“We are alarmed that some taxpayers believe the anonymity of cryptocurrencies provides a license to ignore their tax obligations,” Assistant Commissioner Tim Loh said.

“While it seems like cryptocurrency operates in an anonymous digital world, we closely track where it interacts with the real world using data from banks, financial institutions, and online cryptocurrency exchanges to track the situation. money to the taxpayer.”

Australian notes scattered on a table..
Australian notes scattered on a table.. Credit: pampix/Getty Images/iStockphoto

Cryptocurrency isn’t the only error-prone hotspot Chapman expects the ATO to focus on.

He says the ATO recently claimed there was an $8.7 billion shortfall between the tax individuals should pay and the tax they actually pay.

“The ATO believes that work-related expense claims are the biggest contributor to this ‘tax gap’ and has signaled that it will be looking closely at these deductions this year,” he said.

Chapman listed the deductions he expects to head towards the closest:

  • Claims for work clothes, dry cleaning and laundry costs.
  • COVID-related tax deductions, including quarantine expenses and protective equipment.
  • Deductions for home offices.
  • Meal requests for overtime.
  • Union dues and dues.
  • Mobile phone and internet charges.
  • Motor Vehicle Claims.

“The focus on home office, mobile phone and home internet costs is likely to be particularly pronounced with so many people working from home due to COVID-19,” Chapman said.

“H&R Block’s best advice before making a claim is to be sure you understand what you can and cannot claim and that you have the necessary proof (bills, receipts, diaries, etc.) that you actually have incurred the expense and it was work or business related.

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