Tax articles

myGovID and RAM for tax professionals

BreeH — Wed, 08 Jan 2020 03:04:11 GMT

Ahead of the retirement of AUSkey at the end of March 2020, we’ve seen a lot of questions about myGovID and Relationship Authorisation Manager (RAM). These services are designed to work together to provide authorised persons with access to Online services for agents and Standard Business Reporting (SBR) enabled software.

How do I access the myGovID app?

The myGovID app is available to download from the Google Play or Apple App Store and is compatible with most smart devices using Nougat 7.0 or later (Android) or iOS 10 or later (Apple).

Why can’t I login from a desktop?

There will be no desktop version for myGovID. Your myGovID is unique to you and uses the security and identification features of your smart device to protect your identity and help stop other people accessing your information.

It’s important to understand that myGovID allows you to log on to an online service from any browser, or device that is supported eg. Firefox, Chrome, PC, laptop or tablet.

Modern security standards require extra security to verify that the person who is logging in is who they say they are. This is why myGovID is a credential that is unique to a real person, not a computer.

What email address should I use to login?

The email you use to set up and login to your myGovID must belong to you. It shouldn’t be a shared email. It’s important to remember that your myGovID is unique to you, not your employer if you change jobs.

You can link your business, or be authorised in RAM, using a different email address to the one used to set up your myGovID.

Can we use one myGovID for all staff?

No, a myGovID is unique to an individual and shouldn’t be shared with anyone. Everyone who will be acting on behalf of a business needs their own myGovID.

Will this mean my employer has access to my identity documents?

No, your employer cannot access your identity documents. Your identity documents are used to verify your identity against existing government records and are not stored on your smart device.

I already have a myGov account, aren’t I already set up?

No, myGovID is different to myGov. Your myGov account is how you access government online services, like the ATO. Your myGovID proves who you are before you can access them.

How do I link my practice in RAM?

Find out how to link your practice Australian Business Number (ABN) in RAM and authorise others to act on behalf of your practice at ato.gov.au/TPmyGovID. You must be the principal authority (business owner or listed associate on the Australian Business Register) to link your ABN to your myGovID.

Do I need my clients’ myGovID details?

No, a myGovID is unique to an individual and shouldn’t be shared with anyone. The way you add clients through Access Manager or notify us about working on behalf of a client will not change. You can get to Access Manager via RAM or log in directly using your myGovID.

How do I use myGovID if I don’t have mobile phone reception in my office?

To access your myGovID you don’t need mobile phone coverage, just an internet connection like when accessing government online services.

Is a Standard identity strength all I need to login to Online services for agents?

Yes, you can set up a myGovID with a Standard identity strength by providing two of the following Australian identity documents:

passport
driver’s licence
Medicare card
birth certificate.

Will the smart device I use for my myGovID be deductible?

If you use your own device or internet for work purposes, you may be able to claim a deduction if you paid for these costs and have records to support your claims.

If you use your phone or internet for both work and private use, you will need to work out the percentage that reasonably relates to your work use. Read more about claiming mobile phone, internet and home phone expenses.

Find out more

More information to help tax professionals with the move to myGovID and RAM is available at www.ato.gov.au/TPmyGovID videos and factsheets.

Linking your myGov account to the ATO

PaulM — Fri, 02 Aug 2019 01:06:00 GMT

Welcome to the Community.

In most cases, you can link your myGov account to the ATO without a linking code.

To link your myGov account to the ATO, you’ll need your TFN and details from two of the following documents:

a notice of assessment received in the last five years
a PAYG payment summary received in the last two years
a super account statement from the last five years
a dividends statement from the last two years
a Centrelink payment summary from the last two years
your bank account details (see note).

Note: If you choose to use your bank account to confirm your identity, it must be an account you had your individual income tax refund paid into last year, or one that has earned interest in the last two years.

You can find more information on linking your myGov account to us on our website. If you’re having trouble linking your myGov account, check out our Troubleshooting for individuals page.

Still unable to link after troubleshooting?

If you’re still unable to link after trying our troubleshooting steps (or you’ve received the error message ‘Ineligible to link’), then you’ll need a linking code. You’ll need to call us to obtain a linking code as we’ll need to establish your identity by asking you a number of privacy questions and verifying details from one of the following identification documents:

Australian birth certificate
Australian passport
Australian citizenship certificate
ImmiCard
Australian driver's licence or learner's permit
Medicare card
Australian marriage certificate
Change of name certificate
Australian visa with an overseas passport.

We appreciate tax time is a busy time for everyone, so we’ve extended our operating hours. You can find our phone number and operating hours and as well as information if you’re calling us from overseas on our website

ATO Community

Delivering food or goods using a digital platform or app?

AmandaE — Thu, 05 Sep 2019 01:21:52 GMT

As a delivery driver, do I need to register for GST or apply for an ABN?

If you deliver food or goods for someone else as an employee, you will not have any goods and services (GST) obligations as part of your employment
If you’re a contractor (i.e. you run your own business as a service provider for a larger company) and your turnover is under $75,000 (and you expect to earn less than this) in a financial year, then you are not required to register for GST. You are, however, required to apply for an Australian Business Number (ABN). You can register for an ABN (for free) at this website. You may need to contact the digital platform directly about linking your ABN to your account.
If your turnover is $75,000 or more (or you think you’ll earn above this amount) then you’ll need to get an ABN and register to collect GST. Once you’ve registered, you must charge, collect and then report the GST you’ve collected to us via a business activity statement (BAS) – you’ll also be able to claim GST credits for business expenses.

I deliver food or goods using a digital platform or app, how does this affect my tax return?

How you report your income on your tax return depends on whether you’re an employee or whether you’re a contractor.

If you’re employed by the delivery service provider, you’ll report your income as salary and wages; if you’re a contractor, you’ll need to complete the business sections in your tax return to report your net income or loss. You can confirm your employment status by checking any contracts you’ve signed with the service provider, or check out guide on employees versus contractors over on our website.

You can usually claim income tax deductions relating to income you earn as long as:

You’ve spent the money and not been reimbursed
The costs relate to doing your job and aren’t a private expense (such as travel from home to the job)
You work out how much of the total expense is for your business and how much for personal use
You keep appropriate records to prove your claim.

If I am a contractor, how do I make sure I manage my tax?

There are a couple of options you can use to make sure you don’t get a tax bill when you lodge your return:

You can pay smaller amounts towards your income tax account ahead of time. You can make a payment using our preferred payment methods at any time and as often as you like using your payment reference number (PRN).
You can sign up for our pay as you go income tax instalment system (PAYGI). PAYGI is particularly useful where you have a regular source of income and you can predict how much you’ll make in a year. You tell us how much you think you’ll earn (and in some cases, how much tax you’ll need to pay) and we’ll issue you an instalment activity statement each month, quarter or year so you can increase or decrease your payments as required.

If you’ve reached the end of the financial year and have a tax bill to pay, we can often help you by setting up a payment plan. You can create a payment plan online using our online services in myGov, or you can phone us to discuss your situation for tailored advice and support.

I’m here in Australia on a working holiday maker visa and I deliver using a digital platform or app to earn some cash. Do I need to lodge a tax return?

There are a couple of things you’ll need to work out before you lodge your tax return:

Are you an Australian resident for tax purposes? Generally speaking, if you earn assessable income in Australia during the financial year you’ll need to lodge an Australian tax return. Different tax rates may apply depending on your situation, and you may need to report your income at a particular section in your return to be taxed at the right rate.
Are you an employee or a contractor? If you’re employed, they’ll apply the working holiday maker tax rate of 15% to any payments you receive, and you’ll report your earnings at Adjustments – Working holiday makers on your tax return. If you’re a contractor, you’ll need to register for an ABN and manage your tax affairs as a small business.

Our guide to the sharing economy and tax is full of handy information for new food or goods delivery drivers – you can also ask our Community for help!

Paying my HELP debt

AmandaE — Thu, 19 Dec 2019 23:49:15 GMT

How is my HELP or study loan repaid?

Study loans (which include HELP, SFSS, VSL, SSL, ABSTUDY SSL and TSL) are re-paid through compulsory repayments (including overseas levy), voluntary repayments or both.

Compulsory repayments are made when your repayment income exceeds the repayment threshold. This includes your:

taxable income
fringe benefits
investment loss
super contributions
foreign employment income

You should inform your employer of your study loan on your tax file number declaration form or withholding declaration form if you’re already employed. This lets them know to withhold amounts from your pay throughout the year to cover your anticipated compulsory repayment.

Your compulsory repayment rate increases as your income increases – the more you earn, the higher your repayment.

You can also choose to make voluntary repayments at any time to reduce the balance of your debt. You may still have to make a compulsory repayment or pay an overseas levy if, after making your voluntary repayment:

you still have a debt; and
your repayment income is above the minimum repayment threshold.

Voluntary repayments can be made at any time to reduce the balance of your loan. They are non-refundable and are paid directly to us.

You may still have to make a compulsory repayment or pay an overseas levy if:

you still have a debt
your repayment income exceeds the repayment threshold.

How can I check my HELP or study loan balance?

You can check out how much you have left to pay by logging into your account in our online services via myGov.

What if my employer withholds incorrect amounts?

If your employer fails to withhold amounts from your pay throughout the year, or withholds too much, we’ll calculate your debt or refund after you lodge your tax return.

If a debt causes you financial hardship, you can talk to us about setting up a payment plan.

Why isn't my loan decreasing?

The amounts your employer withholds from your pay won't come off your loan until you've lodged your income tax return and we've calculated your repayment amount.

Once your income tax return is lodged and your compulsory repayment is calculated and paid onto our account, you will see it come off your loan as an annual lump sum rather than weekly or fortnightly payments.

How do I calculate capital gains tax on cryptocurrencies?

AmandaE — Thu, 05 Sep 2019 02:02:32 GMT

Question

Hi! If I make an investment in crypto, say $50,000, and that crypto investment increases in value to be worth $1,000,000, how do I work out how much tax I'll need to pay? Is it true that if I hold on to my crypto for 12 months or more that the amount of tax I have to pay is halved?

I also have read that if I sell some of my crypto to buy a car (for example) CGT wouldn't be payable - is this true? What if I sell the crypto to buy a house? Would that be treated any differently?

Answer

Great questions! Before we start, a couple of caveats:

The following information applies if you’re an investor in cryptocurrencies, rather than a trader. If you’re a trader, you’re considered to be in the business of trading cryptocurrencies, and different rules apply.
We’re using his example here, but obviously different scenarios will apply the information differently. We have a range of tools and guides available, so we encourage you to do your due diligence and make sure you understand how the rules apply to your situation.

You’re correct that cryptocurrency is not a form of money/currency for tax purposes. Under existing legislation, cryptocurrency is considered to be a capital asset, and capital gains tax rules apply on the disposal of these assets.

If you invested $50,000 into cryptocurrency and made $1,000,000 on your investment, firstly, congratulations! Secondly, the original $50,000 would become part of your cost base. The cost base includes a range of expenses associated with purchasing (or ‘acquiring’) your asset:

If you’ve paid other capital costs to acquire or own your cryptocurrency, these will also be included into your cost base.

Once you’ve worked out your cost base, you take its value from your capital proceeds (or what you make on the disposal of your cryptocurrency) to establish if you’ve made a capital gain or a capital loss. If you’ve made a loss, you’ll also need to work out your reduced cost base.

If you make a capital gain, you’ll need to work out if you’re entitled to a CGT discount. If you’ve owned your cryptocurrency for more than 12 months, you can either discount your capital gain by 50% or establish what indexation factor you can apply against your capital gain. You use whichever method provides the best outcome for you.

If you’ve owned your cryptocurrency for less than 12 months, you must use the ‘other’ method, where you simply subtract your cost base from your capital proceeds.

Once you’ve worked out your capital gain or loss:

You either use your capital loss against an existing capital gain, or carry it forward to a future year. If you carry a capital loss forward, you must apply it to your next available capital gain.
You add your capital gain in with the rest of your taxable income, and you pay tax on your total taxable income for the year. The tax will be applied at standard marginal rates - so if you earn more than $180,001 overall that year, you'll pay the highest rate; if you make more than $18,201 but less than $37,000, you'll pay tax at 19%.

Using your example and simplifying the situation:

If your total cost base was $50,000, you take this away from $1,000,000 for a capital gain of $950,000.
If you held your cryptocurrency for more than 12 months, you apply a CGT discount of 50% = $475,000 net capital gain
Add your net capital gain to the rest of your taxable income - let’s say your total taxable income for the year was $97,663 because you had some deductible expenses. $475,000 + $97,663 = $572,663.
Apply tax at the relevant marginal rate. If you earn more than $180,001 for the year, you pay $54,097 in tax + 45c for each dollar over $180,000 = $230,795 tax payable.

CGT always applies on capital assets, regardless of how long you hold them. You’re only entitled to a CGT discount when you hold the asset for more than 12 months.

Finally, ‘disposal’ occurs when you sell, gift or trade cryptocurrency - even if you don’t receive any money for it. When you swap one cryptocurrency for another, you’re considered to have disposed of one cryptocurrency and acquired a new one, which means that CGT applies. The same is true where you gift someone some cryptocurrency - the ‘market value substitution rule’ applies, and you’ve taken to have received the market value of the asset at the time you gifted it.

If you buy an asset with cryptocurrency that you’ve used for investment purposes, you’ll need to calculate the value of the cryptocurrency according to a reputable exchange and then convert this amount into Australian dollars and report it on your tax return.

Completing the Medicare questions on your tax return.

AmandaE — Fri, 11 Oct 2019 01:55:47 GMT

What’s the difference between the Medicare Levy and the Medicare Levy Surcharge?

Medicare gives Australian residents access to a range of medical services, low cost prescriptions and public hospital health care. Medicare is partly funded by the Australian public – most people pay a Medicare levy of 2% of their taxable income.

The Medicare Levy is generally collected as part of your pay as you go withholding from salary and wages, or as part of your pay as you go income tax instalments. Once you’ve lodged your income tax return, we’ll calculate your Medicare Levy based on your taxable income.

The Medicare Levy Surcharge (MLS) is an additional charge (on top of the Medicare Levy) designed to encourage people earning over a certain amount to take out private hospital cover. You may have to pay MLS if you earn more than $90,000 as a single or $180,000 as a family and don’t have appropriate private hospital cover. MLS is not included as part of your pay as you go withholding or pay as you go instalments, so you may end up with a tax bill at the end of the financial year if you’re not exempt. People in different income brackets will also pay different rates of MLS.

Do I have to pay the Medicare Levy?

I'm a pensioner

Your Medicare levy may be reduced if your taxable income is below a certain threshold. In some cases you may not have to pay the levy at all. You may be eligible to claim a full or half exemption if you:

were a blind pensioner
received sickness allowance from Centrelink
were entitled to full free medical treatment for all conditions under Defence Force arrangements or Veterans’ Affairs Repatriation Health Card (Gold Card)

You will also need to meet certain conditions regarding family income to claim an exemption.

I'm not an Australian resident

If you were a foreign resident:

for the full year – you can claim a full exemption for the Medicare levy
for only part of the year – you can claim a full exemption for that period if
- you did not have any dependants for that period, or
- all your dependants were in an exemption category for that period.

I'm not entitled to Medicare benefits

You are exempt from paying the Medicare levy if you:

were a temporary resident and you did not have any dependants or they were all in an exemption category for that period
were not an Australian citizen

However, in order to claim an exemption you must have applied for and received a Medicare Entitlement Statement from the Department of Human Services before you lodge your tax return. If you have not received the exemption before you lodge, your claim may be disallowed and you will be charged the Medicare Levy.

If you’re entitled to a Medicare Levy exemption and you haven’t claimed it, you may still be able to by lodging an amendment once you've received your Medicare Entitlement Statement.

I have private health insurance but you charged me Medicare Levy Surcharge!

If you earn more than the MLS income thresholds, you’ll be exempt from paying MLS as long as you have an appropriate level of private hospital insurance. Private patient hospital insurance is provided by registered health insurers for hospital treatment in Australia.

An ‘appropriate level of cover’ differs depending on your situation. You must have

an excess of $500 or less as a single, or
an excess of $1,000 or less as a couple or a family.

General cover, also known as 'extras', is not private patient hospital cover. Travel insurance and cover from overseas funds are also not considered private patient hospital cover for the purposes of the MLS.

Spouse details and your tax return

AmandaE — Tue, 17 Sep 2019 04:37:28 GMT

Including your spouse's income in your tax return allows us to work out if you’re entitled to specific offsets, rebates or reductions and whether you're liable for the Medicare levy surcharge. If you don't include it, we may need to amend your tax return, leaving you with a possible debt. We consider a spouse anyone you've lived with in a genuine domestic relationship at any point during the year, including de facto and same-gender couples. Even if you're not married, you may have a spouse for tax purposes.

We’ve listed some of the commonly asked questions and answers about providing spouse income details in your tax return. If you can’t find the answer to your question here, ask the rest of the Community!

Do I have to include my spouse's income in my tax return?

Yes, even if you keep your tax affairs separate from your spouse, you'll still need to provide us with their income information. We need this information to work out whether:

you’ll need to pay the full Medicare levy or the Medicare levy surcharge
you’re entitled to tax offsets such as the seniors and pensioners tax offset, super contributions on behalf of your spouse tax offset, zone or overseas forces offset, invalid and invalid carer offsets
you’re entitled to a private health insurance rebate

What spouse income information do I include?

You'll need to include your spouse's taxable income.
Check through the spouse income labels on your tax return to see if there are other fields that apply to your spouse's income.

What if I don't know my partner's income details?

If you can't access this information, you can make a reasonable estimate of these amounts using information such as your spouse's PAYG payment summaries (or income statement) from their employment and taxable government payments such as Centrelink, bank statements, dividend statement or other supporting documentation. As long as you make a reasonable estimate and act in good faith, penalties won’t apply if you make a mistake.

What if I seperated from my spouse or started a new relationship?

If you’ve entered into a spousal relationship during the year, or separated from your spouse part way through, you’ll need to tell us the relevant dates so we can accurately calculate these amounts.If you’ve separated from your spouse throughout the financial year and are now back together, you’ll need to tell us the dates you separated and reunited so we can work out your entitlement to certain tax offsets. We’ll work out the number of days and apportion your entitlement.

We use information about your spouse, your family income and your private health insurance to help work out whether you’ll need to pay the Medicare Levy Surcharge (MLS). You’ll need to work out whether you were liable for MLS for any period during the financial year that you:

were single (that is, you had no spouse or dependent children) so you can apply the single surcharge threshold of $90,000 to your income
had a spouse or any dependent children so that you can apply the family surcharge threshold of $180,000, plus $1,500 for each dependent child after the first, to your income.

If your income was above the relevant surcharge threshold that applies to you, and you and all of your dependants (including your spouse, if any) did not have an appropriate level of private patient hospital cover or were not in a Medicare levy exemption category for the whole year, then you may be liable to pay MLS.

How much tax should I pay on a second job? Claiming the tax free threshold.

AmandaE — Fri, 30 Aug 2019 00:16:47 GMT

I work two different part time jobs. Do I have to pay a higher rate of tax on my second job?

No, you don’t pay extra tax for having a second job. You will pay the same amount of tax on your income whether you have one single job or multiple jobs. So if you earn $1000 a week from a single employer, or from multiple employers, the tax you need to pay will be the same. At the end of the year when you do your income tax return, all of your income will be added together and we will calculate the tax you need to pay based on your combined income.

You can use the ATO’s online tax withheld calculator to find out how much tax should be withheld on our income.

Why does it feel like I pay more tax on my second job than my first job?

You will end up paying the same tax on your income irrelevant if you earn it through one employer or many. At the end of the year when you do your income tax return, all of your income will be added together and we will calculate your tax liability based on your combined income as a lump sum. The reason it might feel like you pay more tax on one job than the other could be because of the tax free threshold.

Basically, Australian residents for tax purposes receive the first $18,200 they earn tax free each year. This is known as the tax free threshold and equates to receiving the first $350 a week or $700 a fortnight income tax free from your employer.

You can only claim this from one employer at a time which means you cannot claim this from a second or subsequent employer. If you did, it would be double dipping and you would end up getting two tax free thresholds and probably a tax bill at the end of the year. If you're certain your total annual income from all employers or payers will be less than $18,200 you can claim the tax-free threshold from each payer. Read more information about claiming the tax free threshold.

As you don't claim the tax free threshold from your second employer, any income you receive from them will be taxed from the first dollar – you won’t receive any amount tax free amount from this employer. This might be why it feels like you are paying more tax on a second job.

What if I have changed jobs during the financial year. Can I still claim the tax free threshold?

Yes, you can change which employer you claim the tax free threshold from at any time. As long as you ensure you are only claiming it from one employer at a time, it will be fine.

You can claim the tax free threshold from one employer at a time, so if you change employers you will stop claiming it from the employer you left and you can chose to claim from your new employer instead.

If you stop working for an employer, you do not need to formally end claiming the tax free threshold with them – when they stop paying you they will stop giving you any tax free amounts as you are no longer earning income from them. When you commence work with your new employer, you will fill out a new tax file number declaration and you can select ‘yes’ to the tax free threshold to claim it through your new employer. There is no limit to how many times you can change your tax free threshold, as long as you are only claiming it through one employer at a time.

Where’s my tax return?

AmandaE — Fri, 11 Oct 2019 01:56:40 GMT

Explaining timeframes, ‘processed’ and ‘effective’ dates and balancing accounts

If you’ve lodged online we’ll aim to finalise the outcome within two weeks. If you send us paper forms, it can take up to 10 weeks – while we manually enter and process your documentation.

You can use our online services via myGov to track the progress of your tax return in real time as it moves through the following stages:

Stage	Status and outcome
1	In progress We’ve received your return, and we’ve started processing it.
2	In progress – information pending We’re collecting information to help us complete processing your return. This may take several days. We may contact you if we need some extra information from you.
3	In progress – under review This status indicates that we’re reviewing your return to make sure everything is right before we finalise it. We may contact you if we need additional information.
4	Cancelled We are reviewing your tax return. This may include ensuring you have included all the information that has been reported to us. You should not attempt to lodge your return again.
5	In progress – balancing account Balancing accounts indicates that we have the result of your return, and that we’re calculating your refund or bill based on your account balance. Your return may still take a few more days while we review your accounts with us and other Australian Government agencies.
6	In progress – processing We’ve finalised your return and generating your notice of assessment.
7	Issued - $ Amount You’ll be able to see your notice of assessment in myGov, along with the effective date for payment if you’re entitled to a refund. Your refund will be sent to your nominated bank account.

What’s the difference between ‘processed’ dates and ‘effective’ dates?

The processed date is the date we finish processing your return and update your tax account.

If you’re entitled to a refund, the effective date is usually the date we send your refund to your financial institution. You’ll need to check with your financial institution to find out how long it may take for them to process your refund.

If you have a tax bill, the effective date will be the date your payment is due.

My return has taken longer than two weeks. What do I do?

We do our best to process tax returns within two weeks, but there are reasons why it may take longer – for example, if:

We need to check information in your return. We may need to contact payers, financial institutions, private health insurers or you to confirm or cross-check information in your return. You don’t need to take any action – if we need any additional information from you, we’ll let you know.
You’ve lodged tax returns for several years all at once. We need to process all of your returns so we can make sure your account is up to date before we issue any refunds or requests for payment.
You’ve entered into a debt or bankruptcy arrangement. If you’ve declared insolvency or entered into a Part IX agreement, we need to undertake additional checks before we can finalise your return. Check to make sure your insolvency practitioner advises us of your situation before you lodge your tax return.
We need to check in with other Australian Government agencies (like Centrelink or the Child Support Agency). We’re required to pay part or all of your tax refund to other agencies if there are outstanding amounts, and we’ll write to let you know if this is the case.

Where possible, we’ll let you know if we need you to take any action, especially if we need extra information from you to process your return. You don’t need to phone us to follow up on the progress of your return as you can use myGov to track the progress of your return.

I need my tax refund to pay my bills.

We know that people experiencing financial difficulties or serious hardship often rely on their tax refund to help pay for essential goods and services. If you can demonstrate that you’re experiencing serious financial hardship, we may be able to process your return as a priority.

If you don’t meet these criteria, you can keep up-to-date with the progress of your return via myGov.

Mining cryptocurrency

BreeH — Thu, 05 Sep 2019 03:49:15 GMT

If I start mining crypto and don't cash out before 30 June, how do I declare the Bitcoing and what value in my tax return? Can I offset equipment and electricity costs? How much tax would I pay?

Generally, when undertaking Bitcoin mining activities, it needs to be determined by analysis of your own activities as to whether this involves carrying on a business or not: see Are-you-in-business on our website for more information. If your circumstances are such that you are in the business of Bitcoin mining you will need to treat your activity the same way as any other business activity.

If you are carrying on a business of bitcoin mining:

All reporting to the ATO must be made in Australian dollars. To convert the value of Bitcoin to Australian dollars you can use the Bitcoin value as published by a reputable exchange on the date of the relevant transaction. You can find more information on our website about record keeping for Cryptocurrency.

Where you are in the business of mining bitcoin, any income that you derive from the transfer of the mined bitcoin to a third party would be included in your assessable income.

Any expenses incurred in respect to the mining activity – including electricity costs - would be allowed as a deduction. The cost of capital assets, such as hardware and software can be depreciated over their effective life.

If you are in business you may be able to apply the small business instant asset write-off to the cost of capital assets. For more information see Applying the $20,000 instant asset write-off or Deductions on our website.

As a miner carrying on a business any bitcoin that you acquire from mining is treated as ‘trading stock’. As in any other business, proceeds from the disposal of trading stock represent assessable income. Also, even if you don’t dispose of your bitcoin, an increase in the total of your trading stock value at the end of the year from any amounts at the start of the year is treated as assessable income, (while a decrease is treated as an allowable deduction). This is also referred to as ‘bringing your trading stock to account’ at the end of the year. There are three methods for working out the value of trading stock at end of the year. For information about valuing trading stock see information on our website about valuing-trading-stock.

Losses you make from a business of Bitcoin mining will be deductible against your other income, however losses you make will be subject to the Non-commercial loss provisions.

Your net income (roughly income less deductions) is the amount that is included in your assessable income, and you will pay tax on this income at your marginal rate.

If you have undertaken some Bitcoin mining activities in a way that is not part of a business your mined Bitcoin would constitute holding of an asset, and the Bitcoin you hold would be a be a capital gains tax (CGT) asset. This means that the CGT rules would apply. No deductions would be allowable. The CGT rules would need to be applied on the disposal of the Bitcoin. You can find more information about Cryptocurrency as an investment and how to work it out on our website.

Although you may view your mining activities as a hobby, the personal use asset exemption rules would not apply to exclude any capital gains made on disposal of the bitcoin. The exemption applies on the basis of how you use or keep the bitcoin that you have acquired from your previous mining activities. Even if your costs of mining the acquired bitcoin are less than $10,000, this would not fit within the definition of that of using or keeping mined bitcoin as a personal use asset. A personal use asset is defined as an asset “that is used or kept mainly for your personal use or enjoyment”. The primary situation that the ATO considers that Bitcoin can be used or kept mainly for personal use or enjoyment is where it is (acquired and then) kept temporarily in order to obtain personal use items- such as paying for goods or services with cryptocurrency. In your situation your main ‘use’ or ‘keeping’ of the bitcoin is not for personal use or enjoyment.

Can cryptocurrency be a personal use asset?

AmandaE — Mon, 21 Oct 2019 01:45:34 GMT

Question

Do you have to declare bitcoin gains if you acquired the bitcoin for your own personal use? Is it taxed? And at what rate?

Answer

Cryptocurrency, like Bitcoin, is an asset for tax purposes, and there may be tax consequences if you sell it or use it to buy other goods or services. This means that, most of the time, when you dispose of cryptocurrency (by trading, selling or gifting) you’ll need to work out if you have made a capital gain or loss.

However, you may be able to ignore cryptocurrency transactions that are done for your personal use.

If you buy and use cryptocurrency solely to purchase goods or services like clothing or music, the cryptocurrency is usually considered to be a personal use asset, and there are no tax consequences.

Example : Personal use

Michael wants to attend a concert. The concert provider offers discounted ticket prices for payments made in cryptocurrency. Michael pays $270 to acquire cryptocurrency and uses the cryptocurrency to pay for the tickets on the same day. The cryptocurrency in these circumstances is a personal use asset, and there are no tax consequences for Michael.

Example : Investment

Peter has been regularly acquiring cryptocurrency for over six months with the intention of selling at a favourable exchange rate. He has decided to buy some goods directly with some of his cryptocurrency. Because Peter was holding the cryptocurrency as an investment, the cryptocurrency is not a personal use asset. This means that Peter will need to consider the tax issues connected with trading his cryptocurrency, and return any gains or profits in his income for the year.

Cryptocurrency is not a personal use asset if it is acquired, kept or used as an investment, in a profit-making scheme, or in the course of carrying on a business. It’s also worth keeping in mind that the longer you hold your cryptocurrency, the less likely it is that it will be a personal use asset.

If you do make a capital gain, you'll add that capital gain to your assessable income for the year and this may increase the amount of tax you need to pay. Because tax isn't withheld from your salary and wages to cover capital gains, you may want to work out how much tax you'll owe and set aside sufficient funds to cover the amount.

Special rules apply in calculating capital gains, and you'll need to ensure you keep accurate records to help you complete your tax return. You can’t make capital losses on personal use assets.