Crypto Owners Need to Report Capital Gains in 2022, Australian Tax Office Warns

Crypto currency background with various of shiny silver and golden physical cryptocurrencies symbol coins, Bitcoin, Ethereum, Litecoin, zcash, ripple. (eamesBot/ShutterStock)

Australian cryptocurrency (or crypto) owners will need to pay due diligence when they lodge their tax returns this year as the Australian Tax Office (ATO) has announced that it will focus on capital gains from crypto-assets for the 2022 tax season.

In a statement released on May 16, the ATO emphasised that Australians would have to calculate a capital gain or loss and record it if they disposed of a crypto asset, including non-fungible tokens (NFTs) in the 2021-2022 financial year.

“Crypto is a popular type of asset, and we expect to see more capital gains or capital losses reported in tax returns this year,” ATO Assistant Commissioner Tim Loh said.

The assistant commissioner also warned that the tax office was aware that many Australians were trading or exchanging digital coins and assets through the data collection process. He also hoped that taxpayers would remember their tax obligations in relation to crypto-assets.

“Remember, you can’t offset your crypto losses against your salary and wages,” Loh said.

File the tax return on time. (Coompia77/Shutterstock)

The announcement comes shortly after the global crypto market experienced a crash in the week commencing May 9, wiping out around US$200 billion (AU$291 billion) in market value in 24 hours.

The ultimate cause of the crash is yet to be identified. However, the damage it inflicted was massive as the market saw Bitcoin slump to about US$26,000 on May 12 before bouncing back to above US$30,000 several days later. But the biggest loser was not Bitcoin, but two other popular cryptocurrencies: Terra and its sister token Luna.

Terra, which was considered a “stablecoin”—a type of cryptocurrency that is pegged against hard currencies, commodities or financial instruments—plummeted from over US$60 to a fraction of a cent within a few days’ span.

Across internet forums, one can see posts from investors describing how they lost their life savings, with some claiming they suffered a US$450,000 loss.

Meanwhile, the ATO also cautioned that it would scrutinise working from home expenses claimed by taxpayers as many workers have returned to the office following the relaxation of pandemic restrictions.

“If your working arrangements have changed, don’t just copy and paste your prior year’s claims,” Loh said, adding that taxpayers can only claim the work-related portion of the expense if it was used for both work and private purposes.

“If you have continued to work from home, we would expect to see a corresponding reduction in car, clothing and other work-related expenses such as parking and tolls.”

The assistant commissioner also advised taxpayers to start organising the income and deductions records they had kept to ensure a smooth tax lodgement. At the same time, he warned that the tax office would take firm action against anyone engaging in falsifying tax records or other illegal behaviours.