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Taxing of Cryptocurrency

University: Kensington College of Business

  • Unit No: 4
  • Level: Diploma
  • Pages: 7 / Words 1728
  • Paper Type: Assignment
  • Course Code: BMA704
  • Downloads: 660
Question :

An analysis is performed with relation to cryptocurrency. 

  • Critical review from Australian newspaper.
  • From the newspapers analysis of various factors associated with cryptocurrency.
Answer :
Organization Selected : Dalata Hotel Group


Cryptocurrencies are usually in the form of online currencies which are used by investors to earn capital gains. Present report deals with working of cryptocurrency in Australia. In addressing this, Bitcoin which is a type of cryptocurrency is mostly used currency belonging to this context. Role of ATO in ascertaining taxes on cryptocurrencies is also discussed in the report. Furthermore, various measures and steps are taken in order to eradicate tax evasion up to a high extent that will also be explained.

Part One

A) Meaning of cryptocurrency

Cryptocurrency is a kind of digital currency for purchase and sale of commodities and goods through the internet. It is also used by investors' looking for trade in currency for the purpose of earning profits in the best possible manner. Moreover, investors' may also use cryptocurrency for producing gains on long-term investments in effective manner. This type of currency is different from other regular types of currencies as it is created digitally for the purpose of exchange and is effectively used by investors to earn profits with much ease. Among these currencies, Bitcoin is widely used by private individuals and so, gains can be garnered in effectual way. Cryptocurrency means that it has decentralised control and as such, they are controlled by users as exchange is done by them. These currencies are built in complex protocols so that investors may be provided with adequate security in the best possible manner and government and banks do not make any decisions regarding cryptocurrency (Rubinstein and Vettori, 2018).

Moreover, working of these currencies is different as well. It has source codes and other technical controls so that it may be securely traded by the interested individuals in effective manner and thus, due to high security, cryptocurrencies are difficult to trade with as well. The governing concepts of these currencies are numerous. In relation to this, first concept is block-chain. It is type of ledger which stores information of all previously done transactions and as such, at a given time period, units of currencies are validated of investors (Clements, 2018).

Another concept of cryptocurrency is that private keys are there for every individuals for authenticating respective identities in effective way. Moreover, there are wallets having unique information which includes temporary units of currencies. Miners also prevails in cryptocurrencies as records are kept by them. They provide accuracy of units held by investors and security of block-chains in respect of currency. Furthermore, there are finite supply as miners produces fresh units of cryptocurrency. Thus, investors' enjoy trading in such currencies and as such, profits are effectively attained by them in the best possible manner (Wimbush, 2018).

B) Cryptocurrency taxed in Australia

The Australian government ensures that all taxpayers trading in cryptocurrencies pay their taxes as per the norms implemented by authority. In relation to this, ATO (Australian Taxation Office) regulates taxation with regards to such currencies. Bitcoin is used mainly by investors in Australia at the moment. In addressing this, ATO has classified that there are two reasons for which Bitcoin is purchased by the investors. First one is for personal consumption and other one is speculative gain. With regards to this, as per the norms of ATO, each and every transactions should be fully documented which implies that investor should justify what is purchased by them and why is it purchased.

In current scenario, if an individual purchase Bitcoin for buying commodities and services for private consumption and any profits are attained from its resale, then it will be taxable. This means that profits will be assessed as capital gain. Appreciation of any in the capital value would be taxed as per marginal rates. However, there are exception in paying taxes if Bitcoin is held for 12 months, half tax will only be charged on it. This implies that tax payer is relieved by paying full tax on the gain garnered. Currently, cryptocurrencies are tagged as a form of property and liable for Capital Gains Tax (CGT) and to be reported to ATO.

On the other hand, profits earned from capital gain are differently taxed from the above discussed personal consumption (Phillip, Chan and Peiris, 2018). The treatment of taxation changes adversely when it is known that investor is going to invest the cryptocurrency for speculative purpose and as such, any profits or gains produced are taxed. This is done by taxing the gains as income. In relation to this, if any appreciation in the capital value, it will be required to be declared by the person as income received from such hike and as a result, the same would be taxed. Taxes will be applicable as per marginal rates fixed by taxation authority. The nature of cryptocurrencies are decentralised and thus, government would face difficulty in carrying out clarity about the transactions being made. Thus, agencies may not be able to track such transactions at least for some time but taxpayers would be unveil by the authority.

C) Role of revenue authorities for correct taxation

The Australian government have taken certain steps so that correct taxation may be attained. In relation to this, ATO provides that cryptocurrencies are difficult to handle for tax computation because of the major reason as it is of decentralised nature. However, steps are taken so that correct tax may be ascertained within regions. Increased transparency would be made in order to handle cryptocurrencies cheating. This can be done effectively by revising anti-money laundering rule may be applied in effective manner. Moreover, taxpayer ID, name, birth, address and previous records will be applied by ATO as this has been followed by US government for carrying out tax evaders in the best possible manner (Holub and Johnson, 2018). It will bring out clarity regarding the investors as cryptocurrencies are partly used for initiating crime and as such, anonymity of persons is also maintained. Thus, forming such rule will provide full clarity to ATO and as a result, correct taxation may be ascertained in the best possible manner.

Moreover, taxpayers would be explored as they will not be able to hide behind block-chain and as such, anonymity will not be present. Thus, increased transparency rule would be beneficial for ATO for extracting identities of persons which are tax evaders. Furthermore, OCED (Organisation for Economic Cooperation and Development) has initiated anti-tax avoidance which will have investigations regarding flow of cryptocurrencies between nations and as a result, team may easily identify whether tax are applicable on such flows. Thus, tax evasion would be easily reduced with much ease. This will allow not to dodge taxes by the investors and as such, taxation will be correctly taxed by the regions (Reynolds, Sögner, Wagner and Wied, 2018). Furthermore, Australian government is planning to launch team in which personnels will be included of various fields and are expert in such cryptocurrencies so that they may be able to explore any tax evaders in effective manner.

D) Measures being taken by tax authorities for ensuring taxpayers fulfill their liabilities

There are various measures being taken by the ATO in order to detect taxpayers who are not fulfilling their liabilities by paying tax on income earned by selling cryptocurrencies. With regards to this, ATO is planning to initiate taskforce which will have experts from different fields such as tax law, finance sector, banking and technology related sectors to make ensure that taxpayers pay their taxes without any evasion by them. Furthermore, OCED global team is also initiated which has the role to carry out flow of cryptocurrencies between countries and as such, tax implications can be made. This help to assess whether tax is applicable on the taxpayers or not. Thus, this will help taxation authority to overcome evasion problem. Moreover, this measures will be successful for ATO to carry out tax evasion in the best possible manner (Allman, 2018).

Furthermore, it is required that key stakeholders are also taken in this aspect and as such, taxpayers may be easily assessed in a better way. Another measure with regards to the concept is that taskforce has been directed to follow the money flows in that way so that transactions may be investigated quite effectually (ATO creates task force to prevent cryptocurrency tax evasion. 2018). Furthermore, it is also required that cryptocurrencies should be presented on tax return form at the end of financial period in the best possible manner. Money laundering is another measure to effectively clarify tax evaders who are dodging authority. Thus, ATO has formed Black Economy Taskforce in effectually identifying investors cheating while paying taxes. Thus, police and revenue authorities will be able to prevent from money laundering in respect of cryptocurrencies and as a result, tax evasion would be controlled in a better way.


Cryptocurrency help to earn gain by purchasing goods and services as it is digital currency and investors' enjoy benefit from the same. However, it is required that taxes should be paid by the individuals who buys such currencies to garner capital gain. Thus, various measures adopted by ATO will help to effectively carry out any tax evasion in the best possible manner. It will help authority in exploring investors who cheating while paying taxes.


Books and Journals

Allman, K., 2018. Briefs hot topic: The dark side of the Bitcoin.LSJ: Law Society of NSW Journal. (42). p.28.

Clements, R., 2018. Assessing the Evolution of Cryptocurrency: Demand Factors, Latent Value and Regulatory Developments.

Holub, M. and Johnson, J., 2018. Bitcoin research across disciplines.The Information Society.34(2). pp.114-126.

Phillip, A., Chan, J. and Peiris, S., 2018. A new look at Cryptocurrencies.Economics Letters.163. pp.6-9.

Reynolds, J., Sögner, L., Wagner, M. and Wied, D., 2018. Deviations from Triangular Arbitrage Parity in Foreign Exchange and Bitcoin Markets.

Rubinstein, F. and Vettori, G. G., 2018. Taxation of Investments in Bitcoins and Other Virtual Currencies: International Trends and the Brazilian Approach.

Wimbush, S., 2018. Bitcoin mining is not uneconomic.Nature.553. p.381.


ATO creates task force to prevent cryptocurrency tax evasion. 2018 [Online] Available Through: <https://www.finder.com.au/ato-creates-task-force-to-prevent-cryptocurrency-tax-evasion>.

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