Australians trading in cryptocurrency may soon get a call from the Australian Taxation Office if its new data-matching program flags a problem.

Each year the ATO matches more than 600 million transactions, but to date its focus has been on transactions that pass through major financial institutions.

Now, the ATO says will it begin collecting records from Australian cryptocurrency designated service providers (DSPs), on an ongoing basis, to ensure people trading in cryptocurrency are paying the right amount of tax.

The data, which will include cryptocurrency purchase and sale information, could also help identify serious black economy fraud and evasion.

The ATO said it was estimated there are between 500,000 and one million Australians who have invested in crypto-assets.

While investors have previously made big gains, the value of Bitcoin, which is traded on the global cryptocurrency exchange market, has been falling in recent months.

In late 2017 the market boomed, with Bitcoin reaching highs of $US19,783 ($28,111). But its price has fallen to $US5141 ($7305).

What data the ATO will be checking

Deputy Commissioner Will Day said the ATO’s use of third-party data would better identify taxpayers who fail to disclose their income details correctly.

Bitcoin and other cryptocurrencies are considered as property for tax purposes in Australia. This means individuals profiting from its trade may be liable for capital gains tax.

But a cryptocurrency investor – that is, an Australian-resident taxpayer who holds a cryptocurrency for more than 12 months before it is used or sold – may be eligible for the 50 per cent capital gains tax discount.

“We are looking at whether the taxpayer has omitted capital gains on the sale of cryptocurrencies,” Mr Day said.

“We are making contact with a range of cryptocurrency service providers including brokerage services, payment facilitators, exchange services and even Bitcoin ATM providers.

“We will be getting a range of sale and contact-related details, as well as transaction dates and times and amount of transfers for individual account holders.”

Mr Day said following the data-matching exercise, people may be contacted by the ATO and will be given at least 28 days to clarify any information that has been obtained from the data provider.

He said penalties may be significantly reduced in circumstances where the agency was voluntarily contacted prior to an audit.

Regulators hunt black economy tax cheats

The ATO is working with other regulators including the Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Australian Securities and Investments Commission (ASIC) to fight the black economy.

Changes to anti-money laundering and counter-terrorism laws last year required digital currency exchanges, which let people trade online assets like bitcoin, to register with AUSTRAC.

The ATO said cryptocurrency had 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.

Mr Day said the ATO was also working in a joint international effort as part of the Joint Chiefs of Global Tax Enforcement (J5), which was aimed at investigating cryptocurrency-related tax evasion and money laundering.

“We are aware that for a small percentage of taxpayers, cryptocurrencies may be used to facilitate tax fraud or money laundering,” he said.

“If we see evidence of criminality, we will work with domestic enforcement partners as well as international tax partners to find them.”

Scams are also on the rise, with criminals now demanding payment from victims through bitcoin.

The Australian Competition and Consumer Commission’s (ACCC) latest “Targeting Scams” report revealed that in 2018, the ATO received 114,625 reports of the ATO impersonation scam, with more than $2.8 million in reported losses.

Victims paid ATO impersonators $732,917 via Bitcoin, $647,817 via Google Play cards and $496,701 via iTunes cards.

“The ATO will never require the payments of tax debts in cryptocurrency, and if people have fallen victim to an ATO impersonation scam, that’s certainly something that they can report to us,” Mr Day said.

–ABC