When dealing with bitcoin or any other cryptocurrency or digital currency, there are some guidelines one should consider to make the tax return process in order. There are several methods of possession and dispose digital currencies including bitcoin that need to take into account at tax time such as Mining, Earning, Minting, Spending, Gifting, Donating and Trading. Based on IRS guidance, virtual currency is considered as capital assets and all general principles applicable based on transactions carried out using digital currencies.
If you or your organization dealing with bitcoin or any other digital currencies, it is advisable to approach a reliable tax consultant in Melbourne who provide precise guidance for Tax return by considering guidelines of ATO.
Here, we have mentioned some basic guidelines one should take into consideration about Bitcoin at tax time.
– Keep Records of Your Bitcoin Transaction – You should keep track of your bitcoin transaction accurately that includes transaction date, transaction amount in Australian dollars, the purpose of the transaction, about the other party, etc.
– For Personal Use – If you are not an enterprise or associated with business and you pay bitcoin for goods and services, there is no GST implications or income tax.
For use of bitcoin for buying services or goods for any personal purpose, any loss or gain of bitcoin disposal will be disregarded only if the bitcoin cost in equal or less than $10,000.
– For Business Purpose – For your business, if you receive bitcoin for providing your services or goods, you will require to keep its record in Australian dollars to mention it as your business income.
If you receive bitcoin for providing services or goods, your business need to pay GST on bitcoin you received. If your goods or services are taxable, you can claim input tax credit on the GST amount you pay for your bitcoin that you received for your payment.
– Capital Gain – It requires paying taxes for disposing bitcoin to carry on a business as capital gain tax.
– Paying Bitcoin to employees – If you pay your employees bitcoin as valid salary or remuneration instead of their salary in Australian dollars, it will consider as a fringe benefit and subject to the Fringe Benefits Tax Assessment Act provisions.
– You can also take advantage of tax by charitable donation of long term bitcoin.
You should also keep records of your bitcoin trading history. Moreover, each time you spend bitcoin, make certain you have records of it. There are several other areas where you need to consult your tax accountant, if you are dealing with bitcoin or cryptocurrency or digital currency. To know more about Bitcoin at Tax time and complete guidance of ATO regarding tax on bitcoin, you can write an email at firstname.lastname@example.org.