Can ATO Track Your Cryptocurrency?: Regulations and Tax Implications

by
Brihasi Dey
Reviewed by
min read
Last updated:

The rise of cryptocurrencies has brought a wave of innovation and opportunities in the financial world. Unlike traditional financial systems, cryptocurrencies operate on decentralised blockchain networks, which can make tracking and regulating these transactions complex. 

However, many crypto investors are still unsure whether The Australian Taxation Office (ATO) can monitor cryptocurrency activities or not. If you are wondering the same, read on to the truth behind ATO's capability to track crypto and what it means for taxpayers in Australia.

How does ATO Track Cryptocurrencies?

The ATO is proactively monitoring crypto activities using sophisticated tools and programs. This section explores the ATO's methods for tracking cryptocurrencies and how it affects individuals and businesses in the crypto space. 

Data Matching Program

Since 2019, the ATO has been actively using a data-matching program to monitor cryptocurrency transactions. The ATO gathers data from various sources, including cryptocurrency exchanges and financial institutions. 

By cross-referencing this information with user records, they can identify individuals who might not be fulfilling their tax obligations related to cryptocurrencies.

Information Accessibility

Designated service providers (DSPs), which include crypto exchanges, are obligated by law to provide the ATO with requested information. This means the ATO has access to data shared during user registrations on Australian exchanges. 

The information collected includes personal details and transaction history. The ATO's data-matching program has accumulated data on cryptocurrency transactions dating back to 2014. They can track crypto trades and investments over several years, allowing them to identify patterns and discrepancies in taxpayers' activities.

Cryptocurrency tax compliance

Cryptocurrency exchanges operating in Australia are required to adhere to Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regulations. This includes maintaining "Know Your Customer" (KYC) policies, which require exchanges to verify customers' identities. KYC data, such as names, addresses, and transaction details, is shared with the ATO to ensure tax compliance.

Collaborations with international tax authorities and technology providers

The ATO recognizes the global nature of cryptocurrency transactions and the need for international collaboration to effectively track and regulate them.

It has established collaborations with international tax authorities and technology providers to enhance its capabilities in monitoring cryptocurrency activities. These partnerships enable the sharing of information and intelligence to identify non-compliant taxpayers and enforce tax obligations.

How is Crypto Taxed In Australia?

When it comes to cryptocurrency, the ATO treats it as an asset for capital gains tax (CGT) purposes. This means that any time you dispose of a crypto asset, such as through trading, selling, gifting, exchanging for another crypto asset, converting to fiat currency, or using it for goods or services, it is considered a capital gains event.

Any income received from cryptocurrency, such as airdrops or staking rewards, must also be included in your tax return under "Other income."

In addition, if you hold a crypto asset for 12 months or more before disposing of it, you may be eligible for a 50% CGT discount. This means that only 50% of the capital gain will be considered for taxation, reducing your overall tax liability on the profits earned from the disposal.

Record Keeping

The ATO states the following “It’s vital that you keep accurate records including dates of transactions, the value in Australian dollars at the time of the transactions, what the transactions were for, and who the other party was, even if it’s just their wallet address.”

Regardless of whether the income is received in Australian dollars or crypto assets, accurate reporting is crucial to ensure compliance with tax obligations.

Handling Capital Loss

In the event of a capital loss, it can only be claimed when an asset is disposed of, and it must be reported in the tax return for the year in which the loss occurred. 

It's essential to note that paper losses, which occur when the asset's value decreases but has not been sold, cannot be claimed for tax purposes. Capital losses can be used to offset capital gains from the current financial year or carried forward to offset gains in future years.

To learn more about crypto taxation in Australia, refer to our guide here.

What About Unreported Crypto Taxes?

If you've unintentionally left out your cryptocurrency gains when filing your tax return, there's no need to panic. 

You can rectify the situation by filing an amended tax return for the relevant year(s). The process is relatively straightforward, and here's what you should do:

Assess Your Tax Liability

Begin by reviewing your crypto transactions for the relevant tax year. Calculate the accurate amount of tax owed based on the gains you made during that period. 

File an Amended Tax Return

There are three ways as per ATO to file an amended tax return:

  • Online through ATO online

You can submit an amendment to your income tax return using ATO’s online services. This may take about 20 days to process.

Regardless of how you lodged your original tax return, you can request an amendment online. Not that you need a myGov account linked to the ATO to access their online services.

  • Completing a paper amendment form

If you can't request an amendment online, you can send the form or request for amendment of your income tax return using this link.

Note that it may take up to 50 business days to process requests made in writing. In case you complete the form yourself, you must sign the paper form.

  • Using a registered tax agent

Your tax agent can complete and submit the income tax amendment electronically for you through the Practitioner Lodgment Service (PLS).

An amendment to a return can be lodged through the PLS, even if the original return or a previous amendment was not made through the PLS. Your tax agent can alternatively send ATO the form or request for amendment of income tax return lodged by tax professionals.

  • By sending a letter

If you choose not to amend your return online or use the paper amendment form, you can write ATO a letter. Your letter must include all relevant information, including copies of any documents that support your request. 

For more details, refer to ATO’s guidelines here.

File Crypto Taxes in Australia With Ease

The ATO's focus on cryptocurrency taxation during tax seasons highlights the increasing importance of tax compliance. With the ATO's capabilities to track cryptocurrency transactions and the advancements in data-matching technologies, taxpayers must understand and fulfil their tax obligations accurately.

But calculating taxes manually can be time-consuming and prone to errors. This is where crypto tax software like Kryptos can help.

Simply import your wallet or exchange transactions to the platform and track your tax liabilities easily. You can also leverage inbuilt tax-saving strategies to save taxes and download instant tax reports that comply with ATO guidelines.

To get started, Sign Up on Kryptos.

FAQs

1. Do I need to report my cryptocurrency holdings to the ATO?

Yes, as per ATO guidelines, you are required to report your cryptocurrency holdings for tax purposes. This includes any capital gains or losses from cryptocurrency transactions.

2. How does the ATO track cryptocurrency transactions?

The ATO employs data-matching techniques, collaborating with cryptocurrency exchanges, financial institutions, and other third parties to collect information on cryptocurrency transactions. They cross-reference this data with individuals' tax returns to ensure accurate reporting.

3. Can I remain anonymous when transacting with cryptocurrencies?

While cryptocurrencies offer pseudonymity, meaning transactions are recorded on the blockchain without revealing personal identities, the ATO can still trace transactions back to individuals through data-matching and other investigative methods.

4. What are the consequences of non-compliance with cryptocurrency tax obligations?

Non-compliance with cryptocurrency tax obligations can result in penalties, fines, or even legal consequences. It is important to accurately report cryptocurrency transactions and pay the appropriate taxes to avoid these repercussions.

5. Can I claim deductions related to cryptocurrency activities?

Certain deductions may be eligible if they are directly related to cryptocurrency activities conducted for business or investment purposes. Consulting a tax professional is recommended to determine which deductions apply to your specific situation.

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

Arrow

Can ATO Track Your Cryptocurrency?: Regulations and Tax Implications

By
Brihasi Dey
On

The rise of cryptocurrencies has brought a wave of innovation and opportunities in the financial world. Unlike traditional financial systems, cryptocurrencies operate on decentralised blockchain networks, which can make tracking and regulating these transactions complex. 

However, many crypto investors are still unsure whether The Australian Taxation Office (ATO) can monitor cryptocurrency activities or not. If you are wondering the same, read on to the truth behind ATO's capability to track crypto and what it means for taxpayers in Australia.

How does ATO Track Cryptocurrencies?

The ATO is proactively monitoring crypto activities using sophisticated tools and programs. This section explores the ATO's methods for tracking cryptocurrencies and how it affects individuals and businesses in the crypto space. 

Data Matching Program

Since 2019, the ATO has been actively using a data-matching program to monitor cryptocurrency transactions. The ATO gathers data from various sources, including cryptocurrency exchanges and financial institutions. 

By cross-referencing this information with user records, they can identify individuals who might not be fulfilling their tax obligations related to cryptocurrencies.

Information Accessibility

Designated service providers (DSPs), which include crypto exchanges, are obligated by law to provide the ATO with requested information. This means the ATO has access to data shared during user registrations on Australian exchanges. 

The information collected includes personal details and transaction history. The ATO's data-matching program has accumulated data on cryptocurrency transactions dating back to 2014. They can track crypto trades and investments over several years, allowing them to identify patterns and discrepancies in taxpayers' activities.

Cryptocurrency tax compliance

Cryptocurrency exchanges operating in Australia are required to adhere to Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regulations. This includes maintaining "Know Your Customer" (KYC) policies, which require exchanges to verify customers' identities. KYC data, such as names, addresses, and transaction details, is shared with the ATO to ensure tax compliance.

Collaborations with international tax authorities and technology providers

The ATO recognizes the global nature of cryptocurrency transactions and the need for international collaboration to effectively track and regulate them.

It has established collaborations with international tax authorities and technology providers to enhance its capabilities in monitoring cryptocurrency activities. These partnerships enable the sharing of information and intelligence to identify non-compliant taxpayers and enforce tax obligations.

How is Crypto Taxed In Australia?

When it comes to cryptocurrency, the ATO treats it as an asset for capital gains tax (CGT) purposes. This means that any time you dispose of a crypto asset, such as through trading, selling, gifting, exchanging for another crypto asset, converting to fiat currency, or using it for goods or services, it is considered a capital gains event.

Any income received from cryptocurrency, such as airdrops or staking rewards, must also be included in your tax return under "Other income."

In addition, if you hold a crypto asset for 12 months or more before disposing of it, you may be eligible for a 50% CGT discount. This means that only 50% of the capital gain will be considered for taxation, reducing your overall tax liability on the profits earned from the disposal.

Record Keeping

The ATO states the following “It’s vital that you keep accurate records including dates of transactions, the value in Australian dollars at the time of the transactions, what the transactions were for, and who the other party was, even if it’s just their wallet address.”

Regardless of whether the income is received in Australian dollars or crypto assets, accurate reporting is crucial to ensure compliance with tax obligations.

Handling Capital Loss

In the event of a capital loss, it can only be claimed when an asset is disposed of, and it must be reported in the tax return for the year in which the loss occurred. 

It's essential to note that paper losses, which occur when the asset's value decreases but has not been sold, cannot be claimed for tax purposes. Capital losses can be used to offset capital gains from the current financial year or carried forward to offset gains in future years.

To learn more about crypto taxation in Australia, refer to our guide here.

What About Unreported Crypto Taxes?

If you've unintentionally left out your cryptocurrency gains when filing your tax return, there's no need to panic. 

You can rectify the situation by filing an amended tax return for the relevant year(s). The process is relatively straightforward, and here's what you should do:

Assess Your Tax Liability

Begin by reviewing your crypto transactions for the relevant tax year. Calculate the accurate amount of tax owed based on the gains you made during that period. 

File an Amended Tax Return

There are three ways as per ATO to file an amended tax return:

  • Online through ATO online

You can submit an amendment to your income tax return using ATO’s online services. This may take about 20 days to process.

Regardless of how you lodged your original tax return, you can request an amendment online. Not that you need a myGov account linked to the ATO to access their online services.

  • Completing a paper amendment form

If you can't request an amendment online, you can send the form or request for amendment of your income tax return using this link.

Note that it may take up to 50 business days to process requests made in writing. In case you complete the form yourself, you must sign the paper form.

  • Using a registered tax agent

Your tax agent can complete and submit the income tax amendment electronically for you through the Practitioner Lodgment Service (PLS).

An amendment to a return can be lodged through the PLS, even if the original return or a previous amendment was not made through the PLS. Your tax agent can alternatively send ATO the form or request for amendment of income tax return lodged by tax professionals.

  • By sending a letter

If you choose not to amend your return online or use the paper amendment form, you can write ATO a letter. Your letter must include all relevant information, including copies of any documents that support your request. 

For more details, refer to ATO’s guidelines here.

File Crypto Taxes in Australia With Ease

The ATO's focus on cryptocurrency taxation during tax seasons highlights the increasing importance of tax compliance. With the ATO's capabilities to track cryptocurrency transactions and the advancements in data-matching technologies, taxpayers must understand and fulfil their tax obligations accurately.

But calculating taxes manually can be time-consuming and prone to errors. This is where crypto tax software like Kryptos can help.

Simply import your wallet or exchange transactions to the platform and track your tax liabilities easily. You can also leverage inbuilt tax-saving strategies to save taxes and download instant tax reports that comply with ATO guidelines.

To get started, Sign Up on Kryptos.

FAQs

1. Do I need to report my cryptocurrency holdings to the ATO?

Yes, as per ATO guidelines, you are required to report your cryptocurrency holdings for tax purposes. This includes any capital gains or losses from cryptocurrency transactions.

2. How does the ATO track cryptocurrency transactions?

The ATO employs data-matching techniques, collaborating with cryptocurrency exchanges, financial institutions, and other third parties to collect information on cryptocurrency transactions. They cross-reference this data with individuals' tax returns to ensure accurate reporting.

3. Can I remain anonymous when transacting with cryptocurrencies?

While cryptocurrencies offer pseudonymity, meaning transactions are recorded on the blockchain without revealing personal identities, the ATO can still trace transactions back to individuals through data-matching and other investigative methods.

4. What are the consequences of non-compliance with cryptocurrency tax obligations?

Non-compliance with cryptocurrency tax obligations can result in penalties, fines, or even legal consequences. It is important to accurately report cryptocurrency transactions and pay the appropriate taxes to avoid these repercussions.

5. Can I claim deductions related to cryptocurrency activities?

Certain deductions may be eligible if they are directly related to cryptocurrency activities conducted for business or investment purposes. Consulting a tax professional is recommended to determine which deductions apply to your specific situation.

All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!

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