Question

After reading newspapers and journal articles and using wider research platforms such as the Australian Taxation Office Rulings on the subject of Taxing of Cryptocurrency and how governments are going to start tackling this issue you should be able to form an opinion to whether the policing of cryptocurrency will be effective or will it be a difficult task for revenue authorities.
For this area of the assessment you need to explain
a) What is Cryptocurrency and how does it work?
b) How is Cryptocurrency taxed within Australia at the moment?
c) What are revenue authorities doing going forward to ensure that it is correctly taxed within their own regions?
d) What is your opinion of the measures being taken by the tax authorities to ensure that they catch all the taxpayers partaking in the cryptocurrency world, will it be successful or will it be difficult to police? This area is based about your opinion so you need to ensure that you give us your own personal views of the topic and not a summary of the articles you have collected in part one of the assessment task.
The requirements of the assignment for part two is to produce a 1500 word essay on your opinion of this topic which should be based on your findings from the Australian newspapers you have collected and any other research you may want to undertake, please do not just provide a detailed summary of the articles you have included in Part 1

Answer 1

1. a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.

its working:- transaction are sent between peers from "cryptocurrency wallets" by matching up public codes which relate back to user held private password(AKA cryptographic keys) Transactions made between peers are recorded on a public ledger of transactions called a “blockchain.” All users of a given cryptocurrency have access to the ledger if they choose to download a “full node” wallet (as opposed to holding their coins in a third party wallet like Coinbase

When a peer-to-peer cryptocurrency transaction is made, that transaction is sent out to all users with “full node” wallets. Specific types of users called miners then try to solve a cryptographic puzzle (using software) which lets them add a “block” of transactions to the ledger. Whoever solves the puzzle first gets a few “newly mined” coins as a reward. Sometimes miners pool computing power and share the new coins. The algorithm relies on consensus. If the majority of users trying to solve the puzzle all submit the same transaction data, then it confirms that the transactions are correct.

2) For tax purposes in the U.S., cryptocurrency is treated as property (a capital asset like stocks, bonds, and other investment properties). It is not treated as a currency; it is treated like real estate or gold. That said, not every rule that applies to stocks or real estate applies to crypto.

Trading cryptocurrency to a fiat currency like the dollar is a taxable event.

Trading cryptocurrency to cryptocurrency is a taxable event (you have to calculate the fair market value in USD at the time of the trade; good luck with that).

Using cryptocurrency for goods and services is a taxable event, i.e., spending cryptocurrency is a “realization event.” You have to calculate the fair market value in USD at the time of the trade; you may also end up owing sales tax.

Buying cryptocurrency with USD is not a taxable event. You don’t realize gains until you trade, use, or sell your crypto. If you hold longer than a year you can realize long-term capital gains (which are about half the rate of short-term).

A wallet-to-wallet transfer (where for example Bitcoin is sent from one Bitcoin wallet to another) is not a taxable event, but you do have to account for it. Be aware that some exchanges may treat wallet-to-wallet transfers as taxable as a “safe harbor” (so make sure to check their records against your own).

Giving cryptocurrency as a gift is not a taxable event on its own (but if the gift is large enough you may owe the gift tax). The recipient of the gift inherits the cost basis. So if you bought .1 BTC for $100, when the recipient sells or trades it they owe taxes on profits over $100.[3][4]

You owe taxes when you sell, trade, or use forked coins or coins you mined. Generally speaking, a forked coin would have a cost basis of $0 (you paid nothing for it), a mined coin would have the cost basis of its dollar value at the time of mining (its value in USD at the time it was recived).

Mining and using crypto as a business have unique considerations (see IRS guidance above). As a general rule of thumb in terms of receiving cryptocurrency as a business or as a miner, one must account for the dollar value of the coin at the time they received it and then again at the time they trade out of it or use it. If you pay someone in crypto you’ll need to report that as well (for example if you pay an employee in crypto or if you pay a contractor over $600 worth of crypto). Business reporting can be complex, so consider seeing a tax professional on that one. Assume receiving crypto as a miner or business is a taxable event.

3) income tax department find it diificult to calculate actually that if the sound wealthy investors have xactly made some investments in bitcoins or not.. and too the calculation of capital gains are dificult Some also claim that they have never bought any crypto currency, or that their accounts may have been hacked a few years ago.

4) in my opinion, might it be difficult or easy. . as it is possible that taxpayers only pay taxes in concerned to their legal businesses which are actually worth for rest of the world. one never know what other person do inside... a quote is that " money makes money" that is with bitcoins or cryptocurrency too. as investment in cryptos makes money... .

it would be easy in some way for authorities bacause if once cyber committee hack the bitcoins webs then each and everry cryptoholder can be caught.