GST and using or receiving digital currency

Posted on 13 December 2023 | by Allan Hall

What to do when you receive and use digital currency as payment for goods and services

Digital currency as payment for goods and services

Receiving or using digital currency to pay for goods and services in your GST-registered enterprise is the same as using money, but it is different to trading digital currency.

Receiving digital currency

If you make a taxable supply and you receive digital currency as payment, the GST amount for that payment included in your business activity statement must be in Australian dollars.

Your tax invoice must meet the normal tax invoice requirements and include either:

the GST payable in Australian dollars
sufficient information to work out the GST payable in Australian dollars.

Examples of sufficient information includes the:

price expressed in Australian dollars
value expressed in Australian dollars, or
conversion rate used by the supplier, or a statement, to work out the GST payable if it is not in Australian dollars.

Using digital currency

If you use digital currency to make a purchase for your GST-registered enterprise and claim a GST credit, the GST amount of the credit in your business activity statement must be in Australian dollars.

To work out your GST credits, your tax invoice will include either:

the GST amount in Australian dollars
sufficient information to determine the GST amount in Australian dollars.

How to convert digital currency

To work out the value of your digital currency for your business activity statement, you must use the exchange rate on the conversion day that applies to you.

Exchange rate

If the exchange rate is in Australian dollars, you may choose to use the exchange rate:

from a digital currency exchange or website, or
agreed on between the supplier and the recipient.

If the exchange rate is in a foreign currency, you must convert the amount expressed in foreign currency to Australian dollars.

Conversion day

The conversion day is the date you use to convert your digital currency into Australian dollars.

If you account for GST on a non-cash basis, your conversion day is determined by whichever happens first of either the:

day you receive any of the payment
transaction date or invoice date.

If you account for GST on a cash basis, your conversion day can be the transaction date, invoice date or the day you receive any of the payment.

CONTACT ALLAN HALL BUSINESS ADVISORS

Teaching children healthy money habits

Posted on 31 July 2023 | by Allan Hall

Set a good example for your children with just a few simple changes

As a parent, you try to ensure your children have the skills to make smart financial decisions. But did you know that you could be sending them negative money messages without meaning to?

Here are some useful ways you could teach your children healthy money habits.

Revealing the magic behind digital money

Your children have likely seen you pay for hundreds of transactions without glimpsing cash changing hands. For small children, it can seem like money problems are solved with magic – just wave or tap a plastic card. This makes it important to discuss the value of money with them. A good way to start is to explain how your earnings get deposited into your bank account and how you use this account to pay bills. For older children, consider showing them how taxes are deducted from your salary.

Spending wisely

Frequently buying things on impulse could send the message that it’s fine to spend without planning. Sticking to a budget is key to avoiding impulse buying. To set an effective budget, consider working with a professional financial adviser. Your adviser may help develop a budget that factors in your income, expenses and financial obligations.

Teaching them independence

It’s convenient to do everything for your children. But by giving them a chance to have their own money and decide how and where to spend it, they could learn powerful lessons about budgeting. For adult children, always offering them financial help can create a cycle of dependency. Letting them make their own money decisions could help them develop financial responsibility.

Including them in budgeting

Many parents keep household financial planning and budgeting to themselves. While you don’t have to fully involve your children in managing your family’s finances, giving them a role to play, such as getting them to do grocery shopping using a set budget, can teach them lessons about money. If your children are old enough to earn some income, why not get them to pitch in to help achieve a family goal?

Using your influence positively

You can strongly influence your children in relation to money, so it’s important to pass on smart money management skills. If you don’t know where to start, consider reaching out to your financial adviser to help you stay on top of your finances through proper planning and budgeting.

CONTACT ALLAN HALL FINANCIAL PLANNING

General Advice Warning

The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs and, where appropriate, seek professional advice from a financial advisor.

This site is designed for Australian residents only. Nothing on this website is an offer or a solicitation of an offer to acquire any products or services, by any person or entity outside of Australia.

Mark O’Connell, Robin Bell, Martin Cimino, Angelo Adam and Allan Hall Financial Planning Pty Ltd are Authorised Representatives of Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323. Consultum Financial Advisers Pty Ltd is a member of the Insignia Financial Group of companies.

Potential cryptocurrency tax implications on trades

Posted on 14 October 2022 | by Allan Hall

Heard of Bitcoin, Ethereum and dogecoin?

These are a few common cryptocurrencies available in the digital world.

“Crypto” is a virtual currency that nobody controls and there are no physical notes or coins, it’s a transfer of digital assets. That’s right “assets” which triggers crypto tax that you need to be mindful of when preparing your tax return.

In the last few years, the ATO has been targeting crypto and it’s important to understand the tax consequences of owning these cryptocurrencies. If you sold, bought or earned interest from crypto during the last financial year, you’ll need to declare this in your next tax return. The ATO has information when you sign up to Australian crypto exchange or wallets and they are increasing their number of sources to track this data. So, if you have dabbled in crypto, it’s best to speak to your accountant and let them know of your crypto transactions so you don’t get caught out.

Crypto gains can be a very complicated topic to understand as it will depend on your personal circumstances as well as the specific transactions you’re making. Generally, like any asset you own, if you sell or trade/exchange a crypto this is a tax event and the gain or loss on this will need to be reported in your tax return.

Disposing of one cryptocurrency to acquire another cryptocurrency is also treated by the ATO as a taxable event. As there is no physical money being received in this type of exchange, the market value of the cryptocurrency you receive needs to be accounted for in AUD dollars.

The ATO has confirmed that when you’re moving crypto around between your own wallets, this is not a disposal and you don’t need to report it (i.e. not sold or exchanged to another form of crypto and not transferred into someone else’s name as beneficiary). This is because you retain ownership of them and they remain in the same currency. However, you need to keep track of the original costs and fees on transfer of the transferred coins and keep sufficient proof of it.

There is software available to help track and store this data such as Koinly, Ledger Vault and CoinTracker to name a few. Each provides a summary of the buys, sells, gains, losses and portfolio summary for the financial year as well as a detailed tax report.

The most important thing to remember is to keep a record of all your transaction events and to disclose your transactions to your accountant so we can assess and advise on the potential tax implications of how you trade.

CONTACT ALLAN HALL

ATO priorities this tax time

Posted on 30 May 2022 | by Allan Hall

Four priorities for the ATO this tax time

The Australian Taxation Office (ATO) has announced four key focus areas for Tax Time 2022.

The ATO will be focusing on:

record-keeping
work-related expenses
rental property income and deductions, and
capital gains from crypto assets, property and shares.

These ATO’s priority areas ensure that there is an appropriate level of scrutiny on the correct reporting of deductions and income.

Taxpayers can take steps to lodge right the first time

Assistant Commissioner Tim Loh explained that the ATO is targeting problem areas where they see people making mistakes.

“It’s important you rethink your claims and ensure you can satisfy the 3 golden rules,” Mr Loh said.

You must have spent the money yourself and weren’t reimbursed
If the expense is for a mix of income-producing and private use, you can only claim the portion that relates to producing income
You must have a record to prove it.

Record-keeping

With some weeks left until 30 June, start organising the income and deductions records you’ve kept throughout the year. This will guarantee a smoother tax time and ensure you claim the deductions you are entitled to.

For anyone who deliberately tries to increase their refund, falsify records or cannot substantiate their claims, the ATO will be taking firm action to deal with these taxpayers who are gaining an unfair advantage over the rest of the Australian community who are doing the right thing.

Lodge right, no worries

We often see lots of mistakes in July as people rush to lodge their tax returns and forget to include interest from banks, dividend income, payments from other government agencies and private health insurers. For most people, this information will be automatically pre-filled in their tax return by the end of July. This will make the tax return process smoother, save you time, and get your tax return right. If you want to lodge earlier, you must take extra time to manually add all your income.

Available pre-fill information and readiness to lodge can be easily checked in the ATO app this tax time.

NB: While the ATO receives and matches a lot of information on rental income, foreign-sourced income and capital gains events involving shares, crypto assets or property, they don’t pre-fill all of that information for you.

Work-related expenses

Some people have changed to a hybrid working environment since the start of the pandemic, which saw one in three Aussies claiming working from home expenses in their tax return last year.

“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,” said Mr Loh.

To claim a deduction for your working from home expenses, there are three methods available depending on your circumstances. You can choose from the shortcut (all-inclusive), fixed rate and actual cost methods, so long as you meet the eligibility and record-keeping requirements.

Each individual’s work-related expenses are unique to their circumstances. If your working arrangements have changed, don’t just copy and paste your prior year’s claims. If your expense was used for both work-related and private use, you can only claim the work-related portion of the expense. For example, you can’t claim 100% of mobile phone expenses if you use your mobile phone to ring mum and dad.

You can easily keep track of your expenses with myDeductions tool in the ATO app. Just take a photo of the receipt in the app, record the details of the expense and at tax time, simply upload the information directly to your return in myTax or email it to your registered tax agent.

Rental income and deductions

If you are a rental property owner, make sure you include all the income you’ve received from your rental in your tax return, including short-term rental arrangements, insurance payouts and rental bond money you retain.

“We know a lot of rental property owners use a registered tax agent to help with their tax affairs. I encourage you to keep good records, as all rental income and deductions need to be entered manually, you can ask your registered tax agent for assistance. If we do notice a discrepancy it may delay the processing of your refund as we may contact you or your registered tax agent to correct your return. We can also ask for supporting documentation for any claim that you make after your notice of assessment issues,” Mr Loh said.

Capital gains from crypto assets, property and shares

If you dispose of an asset such as property, shares, or a crypto asset, including non-fungible tokens (NFTs) this financial year, you will need to calculate a capital gain or capital loss and record it in your tax return.

Generally, a capital gain or capital loss is the difference between what an asset cost you and what you receive when you dispose of it.

“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year. Remember you can’t offset your crypto losses against your salary and wages,” Mr Loh said.

CONTACT ALLAN HALL

Tax treatment of cryptocurrency

Posted on 24 May 2021 | by Allan Hall

The creation, trade and use of cryptocurrency is rapidly evolving.

If you invest in cryptocurrency, you may need to include a capital gain or loss in your tax return.

The term cryptocurrency is generally used to describe a digital asset in which encryption techniques are used to regulate the generation of additional units and verify transactions on a blockchain.

Cryptocurrency generally operates independently of a central bank, central authority or government. Any reference to ‘cryptocurrency’ in ATO guidance refers to Bitcoin, or other crypto or digital currencies that have similar characteristics as Bitcoin.

Everybody involved in acquiring or disposing of cryptocurrency needs to keep records in relation to their cryptocurrency transactions.

If you have dealt with a foreign exchange or cryptocurrency there may also be taxation consequences for your transactions in the foreign country.

Transacting with cryptocurrency

A capital gains tax (CGT) event occurs when you dispose of cryptocurrency. If you are involved in acquiring or disposing of cryptocurrency, there are tax consequences.

A disposal can occur when cryptocurrency is:

sold or gifted
traded or exchanged (including the disposal of one cryptocurrency for another)
converted to fiat currency (a currency established by government regulation or law such as Australian dollars), or
used to obtain goods or services.

If a capital gain is made on the disposal of cryptocurrency, some or all of the gain may be taxed. Certain capital gains or losses from disposing of a cryptocurrency that is a personal use asset are disregarded.

If the disposal is part of a business you carry on, the profits made on the disposal will be assessable as ordinary income and not as a capital gain.

While a digital wallet can contain different types of cryptocurrencies (bitcoin, etc) each cryptocurrency is a separate CGT asset.

Record keeping for cryptocurrency

It is vital to maintain accurate records for all cryptocurrency transactions, including if the cryptocurrency is being used as an investment, for personal use or in business:

transactions dates
cryptocurrency value in Australian dollars at the time of the transaction (which can be taken from a reputable online exchange)
transaction details i.e. what it was for and who the other party was

To accurately calculate your tax and meet your obligations, the typical records that should be kept include:

receipts of purchase or transfer of cryptocurrency
exchange records
records of agent, accountant and legal costs
digital wallet records and keys
software costs related to managing your tax affairs

More information

You can ask your accountant or use third-party software to help meet your record-keeping obligations and work out your tax. Get in touch with our Tax & Accounting team in Brookvale on 02 9981 2300 for advice and assistance.