As news.com.au reports, the Australian Tax Office (ATO) is in the process of contacting up to 350,000 Australian taxpayers who had cryptocurrency transactions in the past couple of years. This is by far the largest crypto tax crackdown reported by a tax regulator. According to an ATO spokesperson, ATO obtained this information through crypto exchanges through a program called Data Matching Protocol for cryptocurrency. Those who receive the letters will have an opportunity to amend the return and pay the applicable taxes.
Regulators commonly send tax letters to educate and alert cryptocurrency taxpayers. During July 2019, the IRS sent out 10,000 tax letters to US taxpayers with crypto activity. These letters came out in three variations: Letter 6173, 6174 and 6174-A. It looks like the ATO is taking a similar approach to improve cryptocurrency tax compliance in Australia.
Tax treatment for cryptocurrencies under Australian tax code is similar to the US tax code for the most part. Under the Australian tax code, crypto currencies are treated as a “form of asset” and subject to capital gains taxes. Therefore, selling, trading or exchanging cryptocurrency and converting it into Australian dollars or a foreign currency or using it to obtain goods or services can trigger taxable events. Record keeping is also essential similar to the US tax system.
This story confirms that — contrary to popular opinion — crypto transactions are traceable and being monitored by tax regulators around the world. The IRS also recently discussed the ability to track cryptocurrency transactions at the IRS Virtual Currency Summit. As always, staying compliant with your virtual currency taxes is the best approach to avoid government scrutiny.
Disclaimer: this post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional. Reach out to us at @cointracker