The popularity of the digital currency known as crypto often leads to many questions when it comes to tax time. However, it’s encouraged that you speak with your accountant about your obligations as soon as possible to be prepared for what you are expected to do.

Cryptocurrency isn’t a foreign currency, despite the name. That’s a myth that the ATO has spent considerable time dispelling, as taxpayers fail to understand the taxable consequences. The ATO classifies cryptocurrencies as property, specifically as capital gains assets.

This means that it is taxed under Capital Gains Tax provisions, where a taxpayer makes a capital gain from the disposal of cryptocurrency if the proceeds/profit exceeds what the cryptocurrency initially cost the taxpayer. It must be reported in their assessable income.

If the taxpayer does not make a profit and receives a loss for the sale, they will need to report that in their assessable income. There is a commonly held belief that the gains from cryptocurrency if the costs for acquiring the asset were less than $10,000 are tax-free. This is not the case.

In very limited circumstances, a cryptocurrency gain of less than $10,000 may be classified as a personal-use asset rather than a capital gains asset. This exemption is usually determined by the Australian Taxation Office’s private rulings according to strict criteria.

Any income derived from the sale or purchase of Bitcoin as an exchange service must be included in the assessable income reported in the tax return lodged at the end of the financial year.

Record-Keeping

The best way to ensure that all potential assessable income results from the return is to maintain immaculate records. You will need to ensure that a record is kept of:

• The date of each transaction
• The amount in Australian dollars at the time of the transaction (which can be taken from a reputable online exchange)
• Details of the transaction
• Any associated expenses, like fees and commissions, and
• Details of the other party (the bitcoin public address is enough).

If you have been involved in the acquisition or selling of bitcoin, and want to be sure that you’re prepared for next year’s tax return, start a conversation with us about your obligations and potential tax liabilities sooner rather than later.

If the circumstances around your tax liability change, it will put us in a better position to assist you.

If you or someone you know began a side business (or “side hustle”) during the last financial year, you would have to meet the tax obligations that come with that business, along with the tax obligations of your primary business.

All income earned through a side business is taxable income. That means every sale you make will count towards your taxable turnover (the total business income from your sales) and must be declared on your income tax return. Additionally, suppose your turnover exceeds or looks like it will exceed $75,000. In that case, you must register for GST and incur the 10% tax added to your taxable sales, payable to the ATO every quarter.

If you have to spend money on purchases or expenses related to the side business, that spending can be deducted from your profits. You only need to pay tax on the difference between your income and deductions. Here are a few things to remember when claiming a deduction for your business.

• The expense you are claiming must have been incurred by the business.
• The expense must relate to the business and can’t be something like your weekly groceries (domestic or private in nature expenses are generally not eligible for claiming).
• If an expense has been incurred that is partly private/domestic and partly for business, that expense will need to be appropriately divided. This is especially useful if you run your business from home and claim home office costs.
• Always ensure that your records are being kept and that there is evidence that the business spent the money. An invoice or a receipt is sufficient evidence in this case, but a bank or credit card statement may also be used.

Other deductible expenses can happen during the initial startup and structuring of the business. These deductions can include costs incurred when seeking professional advice on structuring the business, researching the business’s viability or when developing a business plan.

A few items you might be eligible to claim for your side business include:

• If the business is being run from home, the business portions of bills like utility, phone or internet can be claimed.
• Skilling up for the business or reskilling may be tax-deductible for the cost of courses, training, seminars or conferences (as long as it links to business income).
• Any prep work that occurred during the business startup before the business’ official start can be claimed by the business.

Always ensure that you claim all expenses that could apply to your business.

Good record-keeping will help track all income and potential deductions that come through via the side business, and employing a bookkeeper could ensure that this happens correctly.

Remember that accountants are always here to help you during tax return time, so start a conversation today about how we could assist you.

Before you claim a tax loss for your business, you must ensure that you have correctly claimed the expenses to which you are entitled. If you overclaim expenses, your business can be put into an incorrect tax loss situation, which can make things complicated.

Generally, a business can make a tax loss when the amount spent on expenses outweighs the income.

If you make a tax loss, you may be able to:

• Claim it in the current year,
• Carry it forward or
• Carry it back

Before you claim a tax loss, check that you’ve correctly:

• Accounted for all of your business income
• Claimed expenses, such as cost of goods sold, motor vehicle and ‘all other’ expenses
• Apportioned expenses that have been a mix of business and private use
• Applied your loss to the right year

You also do not want to forget that:

• A capital loss is different to a tax loss – it can only be offset against future capital gains but not income
• If you’re claiming a tax loss from a previous year and your business is a company, you may need to meet requirements such as the ‘similar business test’
• Accurate and up to date records will help you better calculate your income and expenses.It can also help you to avoid incorrectly carrying back a tax loss or carrying forward tax losses to deduct in future years.

If you are a sole trader or an individual partner in a partnership (who meets certain conditions), you may be able to offset current-year losses

If you’re an eligible corporate entity (company, corporate limited partnership or public trading trust), you may be able to claim the loss carry-back tax offset. You can check your eligibility for this tax offset using the ATO’s loss carry-back offset tool, or by consulting with us.

Remember, registered tax and BAS agents like us are equipped to help you with your tax concerns as we approach the best time of year to start planning the next year for your business.

Your tax file number (TFN) is an essential piece of information in your possession and should be a constant companion throughout your life. However, there are times when a TFN is misplaced or forgotten. What are you supposed to do?

If you forget your TFN or lose it, this can be a major issue. A TFN can be used for opening bank accounts, tracking super savings, applying for government benefits, and is required to give to higher education providers (for HECS/HELP loans). It’s also required if you begin new employment, as you have 28 days to provide your new employer with your TFN before they start withholding tax from your pay at the maximum rate.

What Can You Do? 

Your first avenue of inquiry, if you use the services of a tax agent or accountant, will be to ask them for your tax file number, as you will have previously provided it to them. If not, however, you can call the Australian Taxation Office (ATO) to find out what you can do to get your TFN.

The ATO will need to make certain you are who you say you are and that you’re the correct person with whom to be discussing your tax affairs (identity theft can and does occur) – so be ready to answer a few identifying questions.

You may also (if you haven’t done so already) be invited to record a short “voiceprint”, which is another layer of security that can identify you the next time you call.

Another option is to fill in a form provided by the ATO to apply for or inquire about a TFN. But as the ATO will only process the paperwork it provides taxpayers, you will need to order an actual paper form.

Check The Document Trail

Before you grab the phone to track down your lost TFN, you should check other places that it may have been entered into.

You might want to rifle through your paperwork and check the following, as your TFN should be on them:

• your income tax “notice of assessment” for a previous year
• any correspondence sent to you from the ATO
• a payment summary from your employer
• an account statement from your superannuation fund.

Have you recently purchased life insurance?

The type of cover, deductibility of premiums and treatment of claims make life insurance a complex topic for tax. It’s a topic that individuals and businesses alike seek assistance from accountants.

The deductibility of premiums and treatment of claims payouts can be a complex, nuanced topic. The opportunities and traps hidden in those complexities are significantly amplified for professionals with higher incomes and greater-than-average wealth.

For professionals who want to structure their life insurance to optimise the balance between cash flow, tax treatment and robust protection, here’s a high-level look at the issues.

Tax Considerations – Cover Outside Super

While premiums for death, TPD (total or partial disability) and trauma cover are not tax-deductible outside of superannuation, premiums for income protection and business expenses protection are.

On the flip side of that, claims payments from death, TPD and trauma policies are entirely tax-free, regardless of whom they are paid to, while income protection and business expense benefits are classed as income and need to be declared (business expenses payments would naturally offset the actual expenses they are intended to cover).

Special Tax Treatment Of Policies Held For Business Purposes

Some tax concessions are available to life insurance policies held for business purposes, including buy/sell agreements and those covering revenue lost in the event of the death or disablement of a key person.

In such cases, policies are generally held by the business with premiums tax-deductible to the business. However, claim payments are generally regarded as income or a capital gain, depending on the purpose of the cover, and therefore subject to appropriate tax. FBT can also apply where a business pays ownership protection premiums on behalf of individual owners.

Tax On Life Claims Paid Through Super

Death benefits paid through super are generally tax-free if paid to a dependent (a term strictly defined under the law). Benefits paid to non-dependents may include a tax-free component but are likely to be subject to tax on at least some of the balance. Depending on the circumstances, the applicable rate will either be 15 or 30 per cent.

With TPD lump sum benefits, a portion is likely to be assessed as tax-free, depending on the member’s eligible service period. The remainder is subject to a tax rate that varies according to the member’s age.

Other tax-optimisation strategies include taking benefits as an income stream to qualify for tax offsets, maximising the uplift in the tax-free portion of the benefit, and washing out taxable components.

For more information about tax and life insurance, consultation with a tax professional (like us) is advised. This can be a very complicated topic to discern, with many intricacies that you may require assistance with.