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The Australian Taxation Office (ATO) is eyeing crypto investors.
ATO is reportedly in the process of contacting up to 350,000 individuals by letter or email to remind them of their tax obligation when they trade cryptocurrency like bitcoin (BTC). Cryptocurrencies are considered as a form for property and an asset for capital gains tax purposes, so any gains made from it either by buying or selling it is subject to capital gains tax and must be reported to ATO, news.com.au reported.
Mark Chapman, H & R Block’s director of tax communications said that ATO had been looking into discrepancies between people’s tax return and their income from cryptocurrency in the background. The ATO spokesman encouraged crypto investors and traders to keep good records of their crypto transactions to make it easier when they have to pay their taxes.
Investors should keep receipts of purchase or transfer of cryptocurrency, exchange records, records of agent, accountant and legal costs, digital wallet records and keys. The date and time of the transaction, the value of the cryptocurrency in Australian dollar at the time, and what the transaction was for and who the other party was should also be saved.
The spokesman added that crypto traders can check their website to see their obligations related to cryptocurrency. The agency also welcomes crypto investors to discuss their obligations with them. Taxpayers who sold cryptocurrency during the 2017/18 may be contacted by the office to review the return and ensure that the correct capital gains amounts on their return were reported.
Chapman reminded crypto traders that ATO is giving them a chance to fix it, those who will heed their call will go through the formal audit process, but those who don’t will still pay taxes with interest and it can be pretty expensive. He also discouraged those who think that ATO will never find out their crypto transactions.
“The ATO is giving you the chance to fix it, but if you choose not to, what normally happens is you will go through the formal audit process. If you’ve done the wrong thing, you will have to pay the tax you should have the first time which can be pretty expensive and there might also be some interest on top of that, so the financial downsides of not doing this right are considerable,” Chapman said.
“You do also get people who may well have known the tax implications, but assumed the ATO would never find out because it is all done online and it is not in Aussie dollars – it is very much a virtual transaction, so some people out there have assumed the ATO couldn’t follow the money, which is obviously not correct. The ATO gets information directly from these cryptocurrency exchanges,” he added.
Meanwhile, Protocol Labs General Council member Marvin Ammori said that doing crypto taxes is the “worst nightmare” when asked if blockchain is ready for mass adoption. He added that doing so is “very complicated” because one has to keep track of what one pays for the Bitcoin, how much it was worth the moment one spent it, and pay the capital gain or loss on every single transaction.
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