“Our main concern is that many taxpayers believe their cryptocurrency gains are tax-free or only taxable when the holdings are cashed back into Australian dollars,” said the ATO commissioner.
The Australian Tax Office (ATO) says it can’t rely on crypto investors to keep track of their crypto transactions and profits — even though most investors try their best.
Speaking at the 14th International ATAX Conference on Tax Administration conference on Nov. 23, ATO commissioner Chris Jordan stressed that many new crypto investors may not entirely understand their tax reporting obligations:
“In a sector that is growing rapidly with new investors, we can’t rely on taxpayers knowing they need to keep records of their investment income and capital gains and disclose it on their tax returns.”
“Our main concern is that many taxpayers believe their cryptocurrency gains are tax-free or only taxable when the holdings are cashed back into Australian dollars,” he added.
Jordan explained that the ATO has been working on ways to “nudge” people in the right direction such as pre-filling data on tax returns to prompt crypto users to report their investments.
The commissioner also said the ATO has ramped up its trading data matching capabilities in 2021 by sourcing information from cryptocurrency demand-side platforms (DSPs), share registries and brokers.
“We’ve expanded our data matching protocols to get more data from third parties to assist with emerging investments like cryptocurrency.”
He added that, “We are working hard to improve the way we collect, manage, share, and use data, but we are just scratching the surface.”
Related: Reserve Bank warns Aussies over punting on ‘fad driven’ cryptocurrencies
Jordan did note however that “most people do the right thing” as tax reporting compliance, or the “tax performance” of individuals and small businesses in Australia is high with “little or no intervention” from the ATO at 94% and 87% respectively.
Chainalysis down under
A firm that the ATO may call on in future is the Commonwealth Bank of Australia’s partner Chainalysis.
On Nov. 24, Chainalysis’ country manager in Australia and New Zealand Todd Lenfield told the Australian Financial Review that his firm is hoping to provide key expertise to AUSTRAC and the ATO.
“We want to have conversations with AUSTRAC about what they are looking to regulate and explain to the tax office the lessons that can be learned from what the IRS is doing. We can take experience we have got in the space, and provide a local flavor,” he said.
The firm currently provides blockchain analysis services for the U.S. Federal Bureau of Investigation and Internal Revenue Service, it also investigated Russia-based crypto business Suex OTC which was targeted by the U.S. Treasury Department in September over facilitating transactions for ransomware payments.