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Australia: Tax Agency to Contact 350,000 Cryptocurrency Hold...

Australia: Tax Agency to Contact 350,000 Cryptocurrency Holders Concerning Tax Obligations

Australia’s tax authority, the Australia Taxation Office (ATO), is planning to contact thousands of Australian crypto traders to remind them of their tax obligations. The move is in line with the ATO’s aim to clampdown on crypto tax offenders.

350,000 Bitcoin Traders to Receive Warning from the ATO

According to a report by a local news outlet, the ATO would be sending series of warnings to about 350,000 crypto traders in Australia, via emails or letters. The tax agency noted that some bitcoin traders could be unaware of their tax debts, but was willing to give virtual currency taxpayers time to sort themselves.

Speaking to the news outlet, a spokesperson for the ATO said:

“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 keep. Over the next two months, we expect to contact as many as 350,000 individuals who have traded in cryptocurrency in the last few years.”

Also, the ATO regards digital currencies as property, which means that they fall under capital gains tax. Furthermore, the onus of accurate tax reporting falls on bitcoin investors, as they are expected to keep records of all transactions. Such records include transaction dates, parties involved in the transaction, the reasons for carrying out the transactions, etc.

The ATO spokesperson added the tax authority will send reminders to Australian taxpayers involved in crypto trading between 2017 and 2018, asking them to check their returns to ensure proper reporting of capital gains on trading.

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Accurate Tax Reporting Beneficial for Crypto Traders

Director of tax communications at U.S. tax preparation company H& R Block, Mark Chapman, also stated that the ATO had been conducting investigations into irregularities in tax returns since 2019. Chapman further revealed that some of his clients received emails from the tax agency notifying them of the discrepancies and an opportunity to “self-correct” them.

Furthermore, the H & R Block executive noted that about a million Australians were involved in digital currency trading, and added that while some taxpayers got into virtual currency without knowing the tax implications, others deliberately refused to report crypto transactions.

According to Chapman:

“It is very much a virtual transaction, so some people out there have assumed the ATO couldn’t follow the money, which is obviously not correct. The ATO gets information directly from these cryptocurrency exchanges.”

The tax expert continued by saying that it was not financially advisable for crypto holders to avoid accurate tax reporting, as the formal audit process could be costly.

Tax Authorities Continue Crackdown on Crypto Tax Evaders

Crypto traders have been under the spotlight of the ATO for a long time, with the tax authority doing everything in its power to prevent virtual currency traders from evading taxes. There have also been reports of exorbitant crypto tax rules in Australia  Back in May 2019, the ATO assembled data from DSPs in the country to ensure that individuals were correctly reporting crypto holdings.

The regulatory environment in the cryptocurrency ecosystem has been an extremely confusing ordeal to follow. Day by day, the message grows clearer that the crypto wild west era is truly done and dusted. The latest move from the IRS strengthens the government’s agenda regarding individual crypto holdings.

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Letters of this nature are meant to act as a fear factor for investors with the penalties and fines for noncompliance with necessary tax laws highlighted in said correspondence.

Many believe that Coinbase gave account holder information to the government and as a result, only customers with Coinbase have been sent the letter. However, the IRS stated that they are not done mailing all their letters yet and will do so by the end of August.

IRS Commissioner Chuck Rettig believes taxpayers need to take this warning very seriously as the IRS steps up their data analytics processes with regard to digital currencies. In the United States, Bitcoin and other digital assets are treated as an investment property, on similar lines to the likes of publicly listed shares and real estate.

In August 2019, the ATO sent out warning letters to retirees in Australia about the risks of investing in virtual currency. As previously say,the U.S. tax agency, the Internal Revenue Service (IRS) also sent out 10,000 warning letters crypto traders. Recently, the IRS met with crypto stakeholders to discuss crypto tax laws.

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