The Scrutiny of Cryptocurrency as the Ato Extends Its Data – Matching Program

By Kaleem Ulah

February 5, 2024

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According to Accountants Daily, over 600,000 Australians have invested in cryptocurrency and have yet to comply with the tax obligations. They will not be able to hide from their tax obligations due to the data-matching program being extended until 20234 First launched in April 2019, the ATO’s data-matching program will inspect individuals who failed to report the disposal of cryptocurrency, including the capital gain or loss associated with it. 

What can help Australians do?

Cryptocurrency has always been complicated, and as per our accountants, the following tips can help you be tax-ready.

What can help Australians do_

Keep track of your crypto transactions

Keep an organised record of your transactions, whether acquiring, holding or selling. As per the ATO, keep a track record for at least 5 years even after you dispose of your currency.

Differentiate your cryptocurrency as a personal use asset or non–personal use

Understanding the difference between whether your cryptocurrency is a personal use asset or non-personal depends entirely on the following three factors:

  1. Was it kept or used as an investment?
  2. Was it part of a profit-making scheme?
  3. Was it kept or mainly used while carrying their business?

Remember, the longer an individual holds cryptocurrency, the less likely it is considered a personal asset. Always speak to an experienced accountant who can help you save thousands of dollars in penalties.

To calculate your capital gains, always convert your cryptocurrency purchases and sales into AUD

To obtain transparency and accurate figures on your investment, always convert your purchases and sales into AUD value. This will help you save time and more money in the future, of course! These basic tips help you keep your tax obligations on track. Remember, the trade and the use of cryptocurrency is always evolving based on market trends. Make record-keeping your priority to gain the best value on your investments. “As to claim any current year net capital loss against the future capital gains. You must report the losses in your tax returns for future investments.”

Taxation of Cryptocurrency in Australia

There has been a lot of discussion about how to tax cryptocurrency in Australia, even though the Australian Taxation Office (ATO) has recently tried to clarify things.  To determine your income tax, the ATO sees cryptocurrency as an object you hold or trade, not as money or a foreign currency.  The Treasury Law Amendment (2022 Measures No. 4) Bill 2022 was signed into law by the king on June 23, 2023. This clarifies that cryptocurrencies are not foreign currencies for income tax reasons. What people who own cryptocurrency need to know about taxes depends on why they bought or held the cryptocurrency.  The following description is for holders who are tax residents of Australia.

Taxation of Cryptocurrency in Australia

1. The sale or exchange of cryptocurrency

If someone owns cryptocurrency and sells or trades it as part of their business, that cryptocurrency will be treated as selling stock.  You can deduct losses and report gains when you sell cryptocurrency as long as you follow the "non-commercial loss" rules and security measures.  Examples of these types of companies are those that trade in or mine cryptocurrency. Whether or not a taxpayer is running a business is a matter of fact and degree. This is decided by looking at the taxpayer's specific facts and circumstances.  Most of the time, but only sometimes, activities that are done to make money are done over and over, require ongoing work, and include keeping records for the business, which would be considered running a business. 

2. Isolated transactions

When someone owns cryptocurrency but doesn't buy it or invest in it as part of running a business, they may still be able to claim profits or gains from an "isolated transaction" that involves selling or giving away cryptocurrency. This is if the person did it intending to make a profit, and it was part of a business operation or commercial transaction.

3. Investing in cryptocurrency

If you don't buy or hold Bitcoin as part of a business or a one-time deal to make money, any profit you make when you sell or give it away should be considered a capital gain.  In this case, the ATO has said that cryptocurrency is an asset subject to capital gains tax (CGT).  Under the CGT discount rules, capital gains can be lowered as long as the taxpayer meets the requirements for the discount. For example, the cryptocurrency must be held for at least 12 months before it is sold.

There may be a profit gain on the sale of cryptocurrency if it is a "personal use asset" bought for A$10,000 or less.  Capital losses on coins that are owned for personal use are also not taken into account.  You can call cryptocurrency a personal use asset if you bought it and used it quickly for personal use or spending, like buying things for yourself.

4. Staking cryptocurrency

To validate and check transactions in a blockchain, an organisation can hold cryptocurrency units, also known as tokens.  As a prize for its part in this process, the "validator" may get more tokens.  People who own tokens and participate in proxy staking or vote their tokens in "proof of stake" or other consensus methods may also get more tokens as a reward.  The value of these kinds of tokens should be counted as regular pay for the person who gets them.

Conclusion

The ATO's data-matching program is an essential step towards regulating the cryptocurrency landscape in Australia. The ATO aims to tackle tax evasion and money laundering within the sector by requiring Cryptocurrency businesses to provide comprehensive data about their transactions. Ultimately, the ATO's data-matching program demonstrates the evolving nature of regulatory responses to cryptocurrencies. It serves as a reminder that governments worldwide are taking notice and action to address potential risks and opportunities associated with cryptocurrencies.

Have more questions?

Speak to our senior accountants and experts in cryptocurrency tax obligations and requirements. Book an appointment on (08) 7480 2593 or send us a message

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About the Author / By Kaleem Ulah

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Kaleem is CEO & Author at "The Kalculators". With more than 10 years of experience in financial services, He built Kalculators to transform your financial challenges into strategic triumphs!

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