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Part-A

Introduction

Cryptocurrencyhas done many changes in global economicwhich aims to revolutionize and challenge the traditional ways in which parties cash transact with each other. Bitcoin was the first cryptocurrency which made a digital cash system without the needs of central controlling entity, where transactions are verified by the peer review system. In 2014, the ATO responded on cryptocurrency by releasing guidance and its views of the taxation of bitcoin and other that shared the same characteristics as bitcoin.

Taxation on the Cryptocurrency

This news explores some of the challenges in applying the historic in Australian taxation system (Meira, Santana, &Dall’ora, 2019). It helps in changing the environment and worlds economics in recent years, the ATO may wish to reconsider the view expressed in TD 2014/25 that bitcoin is not a “foreign currency” for the purposes of DIV 775 of the Income Tax Assessment Act 1997 (CTH).Cryptocurrency is a form of global currency which is introduced with the goal to revolutionize and reform the traditional manner of transaction between the parties. The very first cryptocurrency was Bitcoin which is a digital cash system without any central controlling authority and the transactions are verified by a peer review system. Any person involved in the transactions of cryptocurrency is also needed to be aware with the consequences of taxation. The consequences of taxation on cryptocurrency are depending on the nature of the circumstances. If a transaction has been made with the cryptocurrency by the way of sell, gift, trade, exchange, conversion or exchange of cryptocurrency to obtain goods or services then the capital gain occurred on the disposal of cryptocurrency may be taxed. However certain capital gains which are occurred from the disposal of any cryptocurrency that is an asset of personal use are disregarded for the purpose of taxation. On the other hand if a person holds a business for sale or exchange of cryptocurrency then instead of the capital gain tax rules the rules of trading rules shall apply on these transactions. This is a repetitive and regular activity for the person in the ordinary course of his business hence this will not lead to the application of capital gain tax rules. When the profit is make from cryptocurrency is determined in AUD amounts and when you exchange cryptocurrency for fiat currency, other cryptocurrencies or goods and services (Wijaya, &Suwarsono, 2018).

For instance if a taxpayer buy 1 BTC of $5,000, and after sell or spend it all worth $10,000, then he would likely pay a $5,000 tax obligation at the moment you sold or spent it.

Particular

Taxable amount

BTC

$ 5000

Sold

$ 10,000

Capital gain

$ 5000

Exempted amount

$ 2500

Taxable amount of the earning on Cryptocurrency

$ 2500

Those profits or losses are what client gets taxed, and depending on the situation they can get taxed in two different ways.This crypto profit may be treated as a personal income or business income, and this type of income relevant of income tax, when the received of cryptocurrency in business activities (Mitchell, & Scott, 2019).

Conclusion

Here is this type of activities may be included, commercial cryptocurrency mining, professional crypto trading, operation business related for cryptocurrency, business related transaction for cryptocurrency, between personal and professional (Elliott, 2017).

Part-2

Answer to question no-1

Income Statement for the year ended 30 June 2019

Particulars

 $'

Fees received

                   250,000

Interest from drawings - Brad

                           400

Interest on drawings - Angelina

                           800

Total Revenues

            251,200

Expenses

 

Rent of the premises and other expenses

                     40,000

Salary of Brad

                     35,000

Salary of Angelina

                     25,000

Superannuation contributions for employees

                       9,500

Bank loan repayments - principal

                     15,000

Bank loan repayments - interest

                           750

Interest on capital - Brad

                       1,250

Interest on capital - Angelina

                       1,250

Interest on loan - Angelina

                       2,500

Penalties and fines

                           500

Entertainment expenses

2,500

Salaries of employees

                   100,000

Total expenses

            233,250

Net Income Before Taxes

$ 17,950

 

Therefore, total net income from the undertaken business activities would be $ 17950 (Correa, Lorca,,&Parro, 2019).

Answer to question no-2

Tax Reconciliation statement of Fiddle Ltd

Amount

Amount

Net profit before tax

 

$17,950.00

ADD:  Items NOT allowed as Deductions

 

 

Salary of Brad

$35,000

 

Salary of Angelina

$25,000

 



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