In the coming weeks, hundreds of thousands of Australian crypto investors are set to receive a reminder of their tax obligations from the country’s authorities.
Citing an unnamed Australian Tax Office (ATO) representative, news.com.au reported on the forthcoming campaign on March 11.
“Up to a million” Australians estimated to be buying or selling crypto
In addition to this, the office published a Data Matching Protocol for cryptocurrency, which it uses to obtain transaction data from crypto exchanges on all taxpayers who have bought and sold cryptocurrency, the ATO representative explained, adding:
“Using this data we’ve found that due to the complex nature of cryptocurrencies, some people may not be aware that there may be tax obligations, so our campaign is designed to help raise awareness and give people the opportunity to fix any mistakes.”
In the coming two months, ATO expects to contact “as many as 350,000 individuals who have traded in cryptocurrency in the last few years.”
By means of email or letter, the office will reportedly be writing to all those it knows hold cryptocurrency, regardless of whether or not they have sold or traded them over the past financial year. The purpose of these communications will be to “remind them of their tax obligations and the records they should be keeping.”
Moreover, taxpayers found to have sold crypto during the 2017–18 financial year could be contacted by ATO with the request that they review their return and ensure they’ve reported the correct capital gains on all trading activity.
Marc Chapman — director of tax communications at American multinational tax preparation firm H&R Block — told reporters that ATO has been investigating reporting discrepancies in tax returns “in the background” since last year.
Some of his clients, he noted, had been given an opportunity to self-correct where discrepancies were found.
He claimed the ATO estimates up to a million people in Australia have had some form of dealings with crypto trading, implying that the office’s campaign will be rather large in scope.
While some traders may have dabbled in crypto without awareness of the tax implications, Chapman added that others:
“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 compared the capital gains on crypto transactions as being akin to buying or selling shares. Anyone who has failed to report accurately appears to have been given a month’s grace to fix it, Chapman said, failing which they will fall subject to a potentially costly formal audit process.
As of press time, the ATO has not responded to Cointelegraph’s request for comment.
International tax authorities are closing in
Last year, the ATO investigated 12 major international tax avoidance schemes, with a key focus on cryptocurrency-enabled activities. The office coordinated its cross-border investigations with the J5 — aka the “Joint Chiefs of Global Tax Enforcement.”
The J5 is an international taskforce of tax enforcement authorities from Australia, Canada, the Netherlands, the United Kingdom and the United States, established in July 2018 in a bid to tackle cryptocurrency- and cybercrime-related risks.
As Cointelegraph has reported, similar to the ATO, the U.S. Internal Revenue Service (IRS) has drawn attention for its own communications campaigns targeted at crypto traders.
In its efforts to combat tax evasion, the IRS summons data from crypto exchanges — just as the U.K.’s payments and customs authority, Her Majesty’s Revenue and Customs, is alleged to have done.