During the recent 14th International ATAX Conference on Tax Administration, Commissioner of Taxation, Chris Jordan, voiced concern that many new investors in cryptocurrencies were not fully cognizant of their tax obligations. New investors were of particular concern as they could not be relied upon to navigate the complexities of income tax, capital gains and blockchain record keeping.
While speaking at the conference, Jordan highlighted cryptocurrency issues as one of the key challenges tax administrators would have to face in the post-pandemic world. This was alongside cyber security attacks on ATO systems and data sharing between tax administrations.
The uptake of these investments has been strong in Australia, with about 18% of the population now owning a stake in some type of cryptocurrency, up from an estimated 13% in March. This growth is expected to continue into the holidays as research indicates that some intended to give crypto-themed gifts this Christmas.
The ATO has however found that despite this strong interest in the crypto market, many taxpayers were seemingly unaware of their unique tax obligations. Cryptocurrency investments are liable for capital gains tax (CGT) as per Australian law. Jordan noted that the authority’s concern lay in taxpayers’ false belief that profits made from these transactions were tax-free or only taxable when the investor cashed in their investment into Australian dollars.
Jordan affirmed that the ATO could not rely on taxpayers knowing that they needed to keep records of their transactions, incomes, and capital gains. All of which they needed to disclose at tax time. To resolve the issues, the ATO has opted to collect data from crypto-related platforms including DSPs, share registries, and brokers. The data is then used to pre-fill forms which in turn prompts taxpayers lodging returns to be aware of their responsibilities.
By expanding its data matching protocols, the ATO has managed to collect large amounts of data from third parties. For the 2020-2021 financial year, the authority managed to pre-fill 89.5 million pieces of data. The government had earlier warned taxpayers that intended to pursue cryptocurrency investors that failed to meet their CGT obligations.
Jordan however noted that most individuals and small businesses made a good effort when it came to tax reporting compliance, with most requiring little or no intervention from the ATO. Individual tax performance was found to be at a high of 94% while small businesses registered an impressive 87%. Jordan however expressed optimism that there was room for improvement.
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