October 2023 – Accounting and SMSF Roundup

October Round up

Our October Roundup focuses on:

1. Cryptocurrency
2. Deductions for superannuation contributions
3. Gifts and donations

Cryptocurrency

Crypto assets are a digital representation of value that you can transfer, store, or trade electronically.

Crypto assets are a subset of digital assets that use cryptography to protect digital data and distributed ledger technology to record transactions. They may run on their blockchain or use an existing platform such as Ethereum. A blockchain is a secure digital ledger used to store a record of crypto transactions.

Crypto generally operates independently of a central bank, authority, or government. However, crypto asset transactions usually are subject to the same tax rules as assets. There are no special tax rules for crypto assets. The tax treatment will depend on how you acquire, hold, and dispose of the purchase.

For tax purposes, crypto assets are not a form of money.

Taxation

You can acquire or dispose of a crypto asset on a crypto trading platform or directly from a digital or hardware wallet. You can exchange or swap crypto assets for other crypto assets, fiat currency or goods and services.

Using or transacting with crypto assets will determine how you treat them for tax purposes. The most common use of crypto assets is as an investment (investors acquire and hold crypto assets to make a financial profit from holding or disposing of them).

Generally, for investors:

  • crypto assets are taxed as CGT assets, including for self-managed super funds (SMSFs) investing in crypto assets.
  • rewards for staking crypto are ordinary income for tax purposes.

Businesses transacting in crypto assets may need to account for them as trading stock or ordinary income (that is, on the revenue account rather than as investment capital gains or losses). In these circumstances, the cost of acquiring crypto assets and the proceeds from disposing of them is ordinary income or a deductible expense, depending on the nature of the transaction.

In some circumstances, crypto assets are not kept mainly for investment but for personal use. Where specific conditions are met, crypto assets are not subject to CGT because they are considered personal use assets.

 Tax Calculation

As with other CGT assets, if your crypto assets are held as an investment, you may pay tax on your net capital gains for the year. This is:

  • total capital gains.
  • less any capital losses.
  • less entitlement to any CGT discount on your capital gains.

Before you calculate CGT on your crypto assets, you will need to:

  • check you have records for your crypto assets and crypto transactions.
  • convert the value of the crypto assets into Australian dollars.

You need to keep details for each crypto asset as they are separate CGT assets. You can work out your CGT using the ATO’s online calculator and record-keeping tool.

This can be a complex area of the taxation law. For this reason, reach out to us if you are still determining your crypto tax position and the records you are required to keep.

Deduction for Superannuation Contributions

Did you know you can make retirement provisions while improving your tax position? This can be achieved by creating a personal, after-tax contribution to your superannuation fund.

You’re eligible to claim a deduction for personal super contributions if:

  1. You made the contributions to your fund that was not a:
    • Commonwealth public sector super scheme in which you have a defined benefit interest.
    • constitutionally protected fund (CPF) or other untaxed fund that would not include your contribution in its assessable income.
    • super fund that notified us before the start of the income year that they elected to treat all member contributions to the super fund as non-deductible.
      • defined benefit interest within the fund as non-deductible.
  1. You meet the age restrictions. If you are under 67, you meet the limits. If you are 67 to 74, you must meet the work test, meaning you must work 40 hours or more in a consecutive 30-day period in the financial year to make contributions.
  2. You have given your fund a notice of intent to claim in the approved form.
  3. Your fund has validated your notice of intent form and sent you an acknowledgement.

Example

Narrelle is a fulltime teacher. During 2022/23, she earned $85,000 before tax.

She makes a personal $15,000 contribution to an eligible superannuation fund during the income year and notifies it that she intends to claim a deduction.

Narrell’s superannuation fund acknowledges that she will claim a $15,000 deduction and taxes the contribution at 15% ($2,250).

Narrelle is eligible to claim a deduction for $15,000 and does this in her 2022/23 income tax return.  This deduction will increase her tax refund by $5,175, an overall tax saving of $2,925.

Please feel free to contact us if you have any questions about this strategy or the taxation of superannuation more generally.

Email: david@ppatkins.com.au77 Willarong Rd
Caringbah, nsw 2229 Australia