Beware, Australian crypto investors — the ATO has you in their sights!
According to a report from the Australian Financial Review, the Australian Tax Office (ATO) will seek to access user account details from centralised crypto exchanges, so they can check if Australians have been paying their taxes on their crypto investments.
The tax office will ask for the records of up to 1.2 million crypto exchange account holders each year and use record-matching to check if the owners have fulfilled their tax obligations.
Under Australian tax law, cryptocurrencies are treated as assets not currencies. This means traders must pay taxes on many types of DeFi activities, such as swaps and liquid staking, not just when they finally sell their crypto for fiat currency.
The new program announced on April 26 means designated crypto exchanges will be required to supply up to 1.2 million account holders’ details to the tax office every year, including their names, addresses, birth dates, and transaction details.
The ATO has used its record matching capabilities since 2019 to check if crypto investors are meeting their tax obligations, but this new program will significantly expand its powers and impact many more investors. Of the program’s objectives, the ATO’s said:
The tax office further states that the innovative and complex nature of crypto can lead to a genuine lack of awareness of the tax obligations associated with these activities. Also, the ability to purchase crypto assets using false information may make them attractive to those seeking to avoid their tax obligations.
So, will we all be hauled before the courts because we didn’t properly declare that airdrop we got in 2018? Thankfully, that’s unlikely.
The ATO says the data will be used primarily to reinforce an awareness-raising and educational approach, rather than an aggressive enforcement approach. It also explicitly said the record-matching programs don’t use data from digital service providers to complete automated action or activities.
As most crypto investors know, crypto tax is especially complicated and hard to navigate.
Last November the ATO published guidance on its website to clarify just what is and what is not a taxable event in the world of crypto (TL;DR pretty much anything you do involving DeFi is a taxable event).
The guidance specifically said that wrapping and unwrapping tokens, staking, providing liquidity, and lending or borrowing crypto all trigger taxable events — this is in addition to tax obligations from when a crypto is sold into fiat currency. Other types of transactions, such as airdrops and token swaps are also taxable events.
Brisbane-based crypto exchange Swyftx estimates up to 23% of Australian adults owned crypto in 2023 — that’s an awful lot of Australian taxpayers filing complicated and confusing crypto tax returns every year potentially set to be impacted by this new record matching program.
