KPMG and the cryptocurrency exchange operator Independent Reserve have launched an online tool to help digital currency traders and investors get a better understanding of their tax position.
Crypto Tax Estimator was developed by KPMG. Available on Independent Reserve’s platform, it allows traders to estimate the tax obligations on their portfolio.
KPMG Australia’s head of blockchain services, Laszlo Peter, says there are few sources of guidance that can help people easily understand their potential tax implications, such as capital gains tax. of trading in cryptocurrencies.
“The possibility of being non-compliant is a source of legal risk, and we want to provide an easy-to-use tool that may assist participants in the token-based economy to understand their tax obligations.”
The Crypto Tax Estimator analyses an Independent Reserve user’s buy and sell transactions. It covers all the cryptocurrencies offered by the exchange, including Bitcoin, Bitcoin Cash, Ethereum, Litecoin and XRP.
Independent Reserve chief executive Adrian Przelozny says: “The Australian Taxation Office has made it clear that anyone involved in acquiring or disposing of crypto assets needs to be aware of the tax consequences.
“This is the first bespoke API [application programming interface], backed by a global professional services firm, to plug directly into a crypto exchange. This tax tool is a piece of critical infrastructure that will help our users understand and manage their risk.”
In its most recent cryptocurrency tax guidance, the ATO says people who convert cryptocurrency to Australian dollars or other money may be liable to pay capital gains tax. It says a CGT event occurs when a person disposes of their cryptocurrency.
A disposal occurs when someone:
- sells or gifts cryptocurrency;
- trades or exchanges cryptocurrency, including the disposal of one cryptocurrency for another;
- converts cryptocurrency to fiat currency, such as Australian dollars; or
- uses cryptocurrency to obtain goods or services.
The ATO says that if the disposal results in a capital gain, some or all of the gain may be taxed.
If the disposal is part of a business, profits on disposal will be assessable as ordinary income and not a capital gain.
While a digital wallet may contain different types of cryptocurrencies, each cryptocurrency is a separate CGT asset.
However, capital gains or losses will be disregarded if the cryptocurrency is a personal use asset. Personal use assets are defined as CGT assets that are “used or kept mainly for personal use or enjoyment.” Any personal use asset acquitted for less than $10,000 is disregarded for CGT purposes.