Anyone thinking they’re in a game of “hide and seek” with the tax office over Bitcoin or other cryptocurrencies is in for a rude shock this tax time.
Australian Taxation Office assistant commissioner Tim Loh has dashed the hopes of crypto owners thinking the anonymous nature of blockchain currencies will make avoiding their tax bills a picnic.
The ATO has just extended a partnership with Australia’s cryptocurrency exchanges requiring them to hand over their trading data until 2022-23.
With all that new information flowing into ATO systems, Mr Loh said it’s actually “pretty easy” for the ATO to track down crypto owners.
“It’s not a game of hide and seek,” Mr Loh told The New Daily.
“Everyone knows how those games end.”
For the avoidance of doubt, the game ends with a tax bill, or worse, a fine.
The ATO is cracking down on crypto owners on 2021-22 tax returns in a major effort to bring more than 600,000 people who have bought crypto under the tax umbrella.
Because the ATO views crypto as an asset rather than a currency, it is taxable when bought, sold or swapped, Mr Loh said.
As TND has previously reported, some experts believe it will be difficult for the ATO to properly track crypto investors because the sector is less regulated than company shares and other assets.
For example, while share trading produces comprehensive buy and sell spreads detailing transactions, the equivalent doesn’t exist for Bitcoin.
But Mr Loh said there won’t be a place to hide, with the ATO earlier this month extending a partnership with major crypto exchanges requiring each to play ball with the tax office’s extensive data-matching protocols.
“Exchanges are required to give us information about the transactions taking place on their exchanges,” Mr Loh said.
“We data-match that to actual records that we’ve got.”
More than 200,000 letters have already been written to crypto owners about their tax obligations this year as part of the latest clampdown.
Another 550,000 people will see pop-up messages when filing their return that remind them to make note of any crypto investments this year.
Exchange is ‘collaborative’
Even exchange managers aren’t immune.
BTC Markets chief executive Caroline Bowler copped a “grilling” from her accountant after the ATO pinged her as a cryptocurrency investor.
“They do know,” she told The New Daily.
Ms Bowler said BTC has a “collaborative” relationship with the tax office and has encouraged users to see efforts to bring crypto under the tax umbrella as evidence that the market is maturing.
“In the same way the banks work with the ATO, there’s a level of reporting that goes back to the ATO,” she said.
“That’s just the nature of the business.”
Ms Bowler said some investors may have decided to hold their crypto rather than sell in the most recent downturn after receiving their ATO letters.
Crypto markets have been in freefall over the past couple of months, with the value of Bitcoin falling from about $US63,000 in mid-April to about $US39,000 on June 29.
“People who bought in the very short term in the last weeks or months, they’re the ones selling off,” Ms Bowler said.
“The longer-term investors are sitting on it.”
Taxing Bitcoin isn’t easy
Working out how crypto should be taxed isn’t easy, though.
For starters, the value fluctuates against the Australian dollar so much that working out capital gains tax liabilities can be difficult, including cost of ownership and tax on trades between different cryptocurrencies.
And then there are the cases when crypto coins are used as currency.
It suggests there are small-scale transactions where crypto is used as a currency to pay for things that aren’t necessarily tax events.
Ms Bowler recommended investors consult their accountants.