The Australian Taxation Office has started collecting data from cryptocurrency service providers as part of a data matching program to ensure people trading in cryptocurrency are paying the right amount of tax.
Service providers are required to give the ATO purchase and sale information. This data is being collected on an ongoing basis.
The ATO estimates that between 500,000 and one million Australians have invested in cryptoassets
From the tax office’s point of view, cryptocurrency is an “enabler of existing risks”.
ATO deputy commissioner Will Day says: “Cryptocurrency has been used to move funds within the black economy, hide money offshore and is sometimes linked to risks with unexplained wealth and undeclared taxable capital gains.”
Day says the ATO will be working with other regulators, including the Australian Securities and Investments Commission, the anti-money laundering regulator Austrac and international bodies to ensure a “whole system approach”.
After it has collected data, the ATO will contact taxpayers and give them an opportunity to verify the information it has collected before an compliance is taken. Taxpayers will be given 28 days to clarify any information.
Last July, the ATO updated its approach to the taxation of cryptocurrency. It says a capital gains tax event occurs when a person disposes of their cryptocurrency.
A disposal occurs when someone:
- sells or gifts cryptocurrency;
- trades or exchanges cryptocurrency, including the disposal of one cryptocurrency for another;
- converts cryptocurrency to fiat currency, such as Australian dollars; or
- uses cryptocurrency to obtain goods or services.
The ATO says that if the disposal results in a capital gain, some or all of the gain may be taxed.
If the disposal is part of a business, profits on disposal will be assessable as ordinary income and not a capital gain.
While a digital wallet may contain different types of cryptocurrencies, each cryptocurrency is a separate CGT asset.
However, capital gains or losses will be disregarded if the cryptocurrency is a personal use asset. Personal use assets are defined as CGT assets that are “used or kept mainly for personal use or enjoyment.”
Any personal use asset acquitted for less than $10,000 is disregarded for CGT purposes.