Bitcoin, sharing economy, work expenses on ATO radar, experts say

IF YOU are one of the forward-thinking investors that took a plunge into cryptocurrency and made money this year, be prepared for scrutiny from the Australian Taxation Office, experts say.

Cryptocurrency, made famous by the Bitcoin boom, is considered an asset by the ATO and will therefore attract tax, according to Simone Gielis, senior tax agent at Etax.com.au.

“It’s subject to the same capital gains tax (CGT) provisions that apply to real estate and shares,” Ms Gielis said. “Any profits you make when selling cryptocurrency are considered capital gains and need to be added to your assessable income.”

Cryptocurrency is technically an anonymous payments system, but must be stored in a bank once converted to cash, which means the ATO can trace it. However, different rules apply when it is used to purchase something.

“The only exception is if you use cryptocurrency to purchase items for personal use,” Ms Gielis said. “With more establishments accepting Bitcoin and other digital currencies as payment, the ATO has ruled that if you buy cryptocurrency to purchase goods or services, then it is classed as a ‘personal use asset’, and therefore exempt from CGT provisions. This is very different to making a gain from cryptocurrency, then using that gain to purchase goods or services.”

Ms Gielis said the ATO is also targeting work-related expenses and the sharing economy.

“The most commonly claimed (work-related) deductions include travel, car expenses, tools, equipment, self-education and work from home office expenses,” she said. “This year the ATO has been loud and clear that they’ll be looking at these claims closely. That doesn’t mean you shouldn’t claim deductions you’re entitled to, but rather if you’re not sure, check (eligibility of expenses) with your tax agent.”

Sharing economy workers need to understand their income is taxable and is simply added to all other income they earn and then assessed as one by the ATO.

“For those new to the gig economy, it can come as a bit of a shock to realise … you actually need to set some cash aside to be able to pay your tax bill,” Ms Gielis said, recommending allocating 40 per cent of earnings to be safe.

The sharing economy can still be confusing for some, said Xero Australia head of industry Matthew Prouse, who recommended visiting the ATO’s sharing economy resource centre.

“Are you providing a sharing economy service like ride-sharing, renting a room, personal services or odd jobs?” he asked. “If so you must lodge tax.”

Ride-share drivers with Uber or Taxify must be registered for GST and have an ABN, regardless of whether they earn $75,000 a year or not, plus receipts should be kept for petrol, car wash and refreshments.

Meanwhile homesharers on Airbnb and Stayz must keep the same records as landlords of regular investment properties, including “which rooms and areas of the property are rented in order to correctly claim expenses,” Mr Prouse said. “There are often income tax deductions available for homesharers including fees and commissions charged by the platform, and properly calculated portions of utility payments, council rates, cleaning and maintenance costs.”

Finally, if the taxpayer worked temporarily in the sharing economy, but has now stopped, it is important to contact the ATO and deregister, or risk receiving a non-lodgement fine.