ATO Targeting Crypto Gains

Over the past couple of years, the ATO has been collecting cryptocurrency sales data of Australian taxpayers in a crackdown of non-reporting of cryptocurrency trading. The program identifies individuals or businesses [that] have or may be engaged in buying, selling or transferring cryptocurrency.

The compliance and clampdown for the collection of data has come about amid concerns that many taxpayers believe cryptocurrency operates in an anonymous digital world, or that gains are tax-free, or only taxable when holdings are cashed back in to Australian dollars.

The ATO’s website has guidelines on record keeping for transactions relating to cryptocurrency, and it is vital that these are adhered to in the event of a disposal and/or an ATO review/audit.  These are:

Records to keep in relation to cryptocurrency transactions:

  • the date of the transactions

  • the value of the cryptocurrency in Australian dollars at the time of the transaction (which can be taken from a reputable online exchange)

  • what the transaction was for and who the other party was (even if it is just their cryptocurrency address).

Records to be kept to substantiate your cryptocurrency transactions:

  • receipts of purchase or transfer of cryptocurrency

  • exchange records

  • records of agent, accountant and legal costs

  • digital wallet records and keys

  • software costs related to managing your tax affairs

Remember for individuals transacting in cryptocurrency, a disposal will result in a Capital Gains event.  A disposal can occur when you:

  • sell or gift cryptocurrency

  • trade or exchange cryptocurrency (including the disposal of one cryptocurrency for another cryptocurrency)

  • convert cryptocurrency to fiat currency (a currency established by government regulation or law ), such as Australian dollars, or

  • use cryptocurrency to obtain goods or services.

In summing up, the ATO’s tax avoidance programs have never been more prevalent, as their technology and real-time data collection are becoming more sophisticated.  The onus is on the taxpayer to keep clear and concise records to substantiate their gains and losses.  In the event that you have not recorded a gain or loss in your tax return and you have had cryptocurrency disposals, then expect the bells of the ATO’s data matching angels to start chiming.

Written By Rod Arnold

Lisa Keep