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The Australian Taxation Office (ATO) is currently working on contacting hundreds of thousands of cryptocurrency investors in the country, reminding them about their tax obligations for trading digital currencies like Bitcoin over the last few years, Australia’s leading media reported Wednesday.
Cryptocurrencies Are Digital Properties
According to news.com.au, the tax regulator is in the process of contacting as many as 350,000 crypto traders over the next two months, either via email or post letters, just like the IRS did in the US last year.
Since cryptocurrencies are regarded as a ‘form of asset’ in Australia, it is a subject of capital gains tax. This implies that traders are liable to pay taxes on gains generated from buying and selling cryptos. Thus, by law, anyone involved in such trades is required to disclose the information to the tax office.
Keeping Records Of Crypto Trades
Speaking to the media, an ATO spokesman said that crypto traders should ensure they have good records of their trading activities to make it easier for them when its time to pay their taxes.
Such records should include exchange records, receipts of purchase or transfer of cryptocurrencies, the date of the transactions, digital wallet records and keys, accountant and legal costs, the purpose of the transaction, the name or ID of the other party, and the value of the cryptocurrency in Australian dollars at the time of the transaction.
The ATO first announced the crackdown last year that they have noticed many discrepancies in taxpayers’ reported amounts and their gains from crypto tradings.
According to the spokesman, it is possible that some traders are not aware that they have tax obligations to fulfill due to the complex nature of cryptocurrencies, and that is why they are trying to raise awareness to give crypto investors the opportunity to resolve their mistakes.
Australians who traded cryptocurrencies during the 2017/2018 financial year may receive the ATO letter or email. They will be asked to review their gains to ensure that they reported the correct amounts on their returns. Failing to report the accurate capital gains amounts could lead to an audit from the tax office.
“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,” the spokesman said.
Traders Already Receiving the ATO Email
Mark Chapman of Block’s director of tax communications, shared with news.com.au that the ATO has already started sending the emails to crypto traders, including some of their clients.
Chapman said that the tax regulator had been reviewing, for months, the discrepancies since the ATO made the announcement last year. He further added that some traders might have knowingly failed to report accurate information about their gains, thinking the tax office will never find out since all transactions are done online.
That is “obviously not correct. The ATO gets information directly from these cryptocurrency exchanges,” Chapman said.