The Australian Taxation Office requires the nation’s cryptocurrency users to report their operations in order to verify tax compliance. Warning them of stiff penalties if they fail to report income or pay tax on crypto holdings, the ATO said over 350,000 individuals are expected to receive letters by mail or emails to “remind them” of their obligations.
Thousands of Australian taxpayers across the country have already received instructions on how to accurately report their cryptocurrency-related income and amend their tax returns, if necessary.
The letter is specifically intended to scare recipients who sold virtual coins during the 2017/18 financial year to review their return and identify any potential undeclared profits.
While the ATO has previously published a guide aimed at crypto dealers to help shed light on the taxation process, its latest letter seems a generic mailing campaign that gives warnings to suspected tax cheats, and not a personally targeted enforcement action.
Indeed, the Tax Office sees digital assets as property rather than as forms of money. As a result, cryptocurrency investors may owe corporation tax, income tax, or capital gains tax depending on their activities and transaction type.
The ATO has gone a step further, indicating that it obtained cryptocurrency transaction data from local exchanges on taxpayers who have bought and sold cryptocurrency. Brokerage firms or exchanges located in Australia are obliged to inform the tax watchdog of all cryptocurrency transactions performed, regardless of their value.
As for the exchanges based out abroad, the customers themselves will have to report the transaction themselves, whenever their monthly trading volumes exceeds certain thresholds.
Regulators push back against cryptocurrency investors
“Using this data we’ve found that due to the complex nature of cryptocurrencies, some people may not be aware that there may be tax obligations, so our campaign is designed to help raise awareness and give people the opportunity to fix any mistakes,” an ATO spokesman told news.com.au.
“For other taxpayers where we can see they hold cryptocurrency, but may not have sold or traded any during the (financial) year, we will be writing to them to remind them of their tax obligations and the records they should be keep,” he added.
Recently, there have been numerous reports emerging of tax authorities clamping down and going after cryptocurrency traders. The US Internal Revenue Service (IRS) also sent letters to taxpayers who might have failed to report income and pay the resulting tax from cryptocurrency transactions.
At the very core, the IRS still deems crypto assets to be property rather than currency for income tax purposes, the same as its regulatory guidance came out five years ago. That means the authority will continue to tax crypto profits and losses like those for stocks, at capital gains rates.