Australian cryptocurrency investors can’t be trusted to keep transaction records themselves, the ATO says

Australian cryptocurrency investors can’t be trusted to keep transaction records themselves, the ATO says
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  • Cryptocurrency investors cannot be relied upon to track their own investment income and tax liabilities, the Australian Taxation Office (ATO) says.
  • As new investors flood into the market, ATO commissioner Chris Jordan said the organisation is relying more on data from exchanges and brokers themselves.
  • This kind of data lets the ATO “better analyse where someone needs a nudge in the right direction”, he said.
  • Visit Business Insider Australia’s homepage for more stories.

As first-time investors continue their rush on cryptocurrencies, the Australian Taxation Office (ATO) says it can no longer rely on taxpayers to navigate the complex world of income tax, capital gains, and blockchain record keeping on their own.

Australia is a world leader in cryptocurrency adoption, with Finder data suggesting nearly 18% of the population owned a stake in cryptocurrencies like Bitcoin, Ethereum, or Cardano in October, up from 13% in March.

That market hype is expected to continue through to the end of the year. A Crypto.com survey of those who have already dabbled with blockchain assets found nearly a quarter of respondents are considering passing off crypto-themed gifts this Christmas, potentially exposing the technology to an even broader audience.

But this widespread adoption comes with unique tax obligations, the ATO says, as profits on cryptocurrency investments are liable for capital gains tax (CGT) under Australian law.

Speaking at the International Conference on Tax Administration in Sydney on Tuesday, ATO commissioner Chris Jordan said many newcomers are unable to parse these requirements on their own.

“In a sector that is growing rapidly with new investors, we can’t rely on taxpayers knowing they need to keep records of their investment income and capital gains and disclose it on their tax returns,” he said.

Instead, Jordan said the ATO has turned to exchanges and brokers for that data themselves, allowing the government body to pre-fill 89.5 million pieces of data over the 2020-2021 financial year.

“We’ve expanded our data matching protocols to get more data from third parties to assist with emerging investments like cryptocurrency,” Jordan said.

“Acquiring data from sources like cryptocurrency [demand-side platforms], share registries and brokers, and pre-filling this data to prompt clients when they lodge means we raise awareness of their responsibilities when it matters most,” he added.

This kind of system will “allow us to better analyse where someone needs a nudge in the right direction, or a firmer hand”.

His statement comes after months of warnings from the ATO that it will use data to pursue cryptocurrency investors and speculators who fall foul of their CGT obligations.

In May, ATO assistant commissioner Tim Loh said, “We have data-matching protocols [in place] to ensure people who are trading cryptocurrency are paying the right amount of tax.”

And in June, an ATO spokesperson said the organisation is increasingly worried by fresh investors misunderstanding the rules entirely.

“Our main concern is that many taxpayers believe their cryptocurrency gains are tax free or only taxable when the holdings are cashed back into Australian dollars,” the spokesperson said.

Individual tax “performance” still sits at 94%, Jordan said, indicating the vast majority of Australians are across their own responsibilities.

However, Jordan said there is always room for improvement.

“We are working hard to improve the way we collect, manage, share, and use data, but we are just scratching the surface,” he said.