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Do You Have to Pay Taxes On Bitcoin Profit?.

Do you have to pay taxes on bitcoin profit

Go back in time with me. It’s 2011, and the world is starting to hear this new word floating around the internet.

Bitcoin. (And mind you, this is well before anybody started to ask about paying taxes on bitcoin profit. But we’ll get there. Be patient.)

Is it a scam? Is it a method for the underworld to launder their money? Is it going to be the next big thing? No one is certain.

Oh sure, you have your first adopters, those who bought in big and tried to convince the rest of us that this cryptocurrency. You also have your financial advisors who saw this as a gigantic risk and wouldn’t dare to set foot in the cryptocurrency trade.

And there was you. Whatever camp you fell into back then, I’ll bet your tune has changed about bitcoin. I know my thoughts have changed. I wasn’t so certain about it at first. At least, not enough to consider how large it would eventually become. But when I started getting calls from my clients about how they report their bitcoin profits in their taxes, then my ears perked up.

My clients were making hundreds of thousands, even millions in bitcoin surges and drops, all within a matter of months. I was impressed, and I knew I had to start paying attention.

Unfortunately for all of us, that’s also when the Australian Tax Office started to sit forward in their chairs as well. These money-grubbers started greedily rubbing their hands together, once they saw that this wasn’t necessarily a currency. It was an asset, much like property or stocks. And if it was a currency, then it could be taxed. And audited. And carefully monitored.

In this present day, the ATO is looming over your e-wallets, looking closely at your profits, and just waiting for the chance to take whatever they can get from you. That 3-5 year grace period has lapsed, the period where the ATO sits back and wonders if it’s worth their while to

pay close attention. We’re now in the season where your bitcoin profits will most certainly be taxed, and taxed to the fullest extent that they can legally get their hands on.

So, do you have to pay taxes on your bitcoin profit? You better believe it.

Paying Less Tax on Bitcoin Profit

But that’s a keyword there that I used – legally. I’m no advocate for illegal tax evasion schemes. In fact, I’ve been audited and carefully scrutinized for my work, especially since my name was the only Australian mentioned in the Panama Papers leak, where my reputation was proved to be clean and above board.     

In fact, I wear one phrase from that article as a badge of pride:

“[Warren Black] is known for his ability to create out-of-the-box solutions to minimize tax”

That’s all you need to know right there. While I don’t advocate for trying to illegally dodge your tax bill, I’m certainly well equipped to help you minimize your bitcoin tax bill as much as

I legally can.

It just takes some planning.

Use an Accountant Who Understands Bitcoin Taxes

Bitcoin

I might be a little ahead of the game when it comes to handling cryptocurrency tax reporting. Once I determined that the ATO would eventually wise up and start looking at bitcoin profits as their next big tax revenue, I started my education.

Not many other accountants did. If you’re going to play ball in the cryptocurrency trade markets, you need to be equipped with the right record-keeping software that keeps tracks of losses and gains within your bitcoin portfolio.

With recent rulings from the ATO, they’ve successfully proven their case that bitcoin, and all other cryptos, are considered assets that are taxed the same way as other assets. I might have some personal feelings about the matter that differ from the government, but my opinions don’t hold sway when it comes to your tax returns.

The tax office is going to expect to see records of all your trades. It doesn’t matter which wallet, which exchange, or which coin you use, you need to have an accountant that speaks that language and understands how to track your trades and your profits.

For instance, did you know that if you’re trading full-time (or at least enough to consider this your occupation), you can claim your losses against other income? Speak to your accountant about this because there are strict regulations around what the government

considers before you can claim your bitcoin trades as capital gains and losses.

Also, please make sure your accountant is working for you. Too many in my profession are working simply to appease the great and mighty tax office as if it’s their employer. Good accountants are those who work to keep more of your money in your wallet, digital or

otherwise.

Start a Family Trust

Personal income tax rates, whether it’s the tax on your bitcoin profits, or the tax taken out of your wage, are ludicrously high. At least, that’s my belief. It should be your belief as well.

Imagine that you went to a fancy night out with your partner, and the bill arrives after a wonderful evening. The price has somehow jumped 46.5% from the price you first saw on the menu. You’d be outraged, wouldn’t you?

Of course. That’s why we should all be more incensed when the Aussie government tries to lop off as much as 46.5% of your salary in taxes. That’s outright robbery. It’s no wonder that people like Kerry Packer make public statements like

“I pay whatever tax I am required to pay under the law, not a penny more, not a penny less… if anybody in this country doesn’t minimize their tax they want their heads read because as a government I can tell you you’re not spending it that well that we should be donating extra.”

Very eloquent, Mr. Packer.

But that’s where the family trust comes in handy. As a tax structure, its designed to hold the assets and then distribute them pre-tax to whoever you deem as the beneficiaries.

Let’s say that one of my clients earns a salary of $250,000 from his private medical practice. He invests in bitcoin on the side, and this year has been especially kind, with $100,000 in profits from the bitcoin market alone.

If my client were ill-advised, he would transfer that $100,000 back into his account and immediately be forced to give up $46,500 of his bitcoin profits as taxable income.

But if the bitcoin trading was done under a family trust, that profit would be held at first by the trust. Then, instead of all $100,000 being transferred into one account, it’s manageably distributed to his wife, his kids, and some to a registered charity of his choosing.

In doing so, the total tax bill comes to just $21,600 as well as a decent tax deduction to be made later. For those keeping track, my client saved over $25,000 in taxes, all through one legal tax structure. It’s a remarkable way to pay less tax on your bitcoin profits.

How are Bitcoin Profits Taxed? 

More and more, the Australian Tax Office is gearing up its auditing departments to handle cryptocurrency trading. And as I mentioned, the ATO have successfully proven their case that cryptos like bitcoin are assets, especially with long-term holds and significant profits and losses.

So, that means that your e-wallet gains and losses are going to be looked at as legitimate income sources. Sure, bitcoin might be volatile and controversial, but the ATO hasn’t let that get in the way of viewing your bitcoin profits as their next revenue source.

And I, for one, don’t believe that the government is able to handle its revenue well. This means that you should be doing all you can to prevent yourself from paying too much tax on bitcoin profit.

Although I admit that I was skeptical at first, I’ve swung around to see bitcoin as a viable way to make a living. Especially after several of my clients have made their fortunes in the cryptocurrency markets.

Now, myself and my business partner Virna White upgraded our systems and upskilled our staff to do the same. In fact, several of the staff at WealthSafe are crypto investors themselves. They’ve taken the precautions themselves and understand what the government requires to legally define yourself as a bitcoin trader or to properly set up tax structures so that you don’t have to pay through the nose.

If you’re concerned about paying taxes on your bitcoin profits, contact us today. We’ll gladly review your situation and make a personalized plan that suits your needs. As I said before, we’re here to make sure your money stays with you, and we’ll legally do all we can to slash your tax bill to as little as possible.

So, in conclusion, unless you’re 100% satisfied with how the government is using your tax money properly, maybe it’s time to stop paying them much and keep your hard-earned wealth in your pocket. Call us today to sort out your cryptocurrency tax needs.

Book Your Free
Tax Saving Assessment.

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