Cryptocurrency tax evaders, The Australian Tax Office (ATO) has announced that over 600,000 Australians who have invested in cryptocurrency will no longer be able to hide from their tax obligations as the ATO extends its data-machine program until 2023.

Originally launched in April 2019, the ATO’s cryptocurrency data-matching program will now scrutinise cryptocurrency transactions and account information from designated service providers for a further three financial years to 2022–23.

The data that is gathered will identify the buyers and sellers of crypto assets. The ATO anticipates records relating to 400,000 to 600,000 individuals to be obtained each year.

Data collected by the ATO will include identification details such as; names, addresses and phone numbers as well as transaction details such as bank accounts, transaction dates and the type of coin.

Cryptocurrency tax evaders, the ATO, has outlined that the data will uncover individuals who have failed to report a disposal of cryptocurrency and the appropriate capital gain or loss in their income tax return.

The data collected under the program will be retained for seven years to enable the ATO to cross-reference taxpayer records retrospectively.

Crypto interest has exploded significantly over the past year. At it’s peak the bitcoin currency reached highs of over $80,000 in mid-April 2021. Even dogecoin, a cryptocurrency that started as an internet meme, saw its value spike by 12,000 percent in May.

The extension of the cryptocurrency data-matching program was registered by the ATO on Wednesday 9th June and comes as the ATO looks to write letters to up to 100,000 taxpayers ahead of tax time to warn them about their cryptocurrency tax obligations.

The anonymous nature of trading crypto assets had led taxpayers to believe their investments were untraceable. The ATO has been alarmed that some taxpayers think that the anonymity of cryptocurrencies provides a licence to ignore their tax obligations.

“While it appears that cryptocurrency operates in an anonymous digital world, we closely track where it interacts with the real world through data from banks, financial institutions and cryptocurrency online exchanges to follow the money back to the taxpayer” says a spokesperson for the ATO.

Australia’s Cryptocurrency Tax Treatment

In basic terms, whenever you make a profit when you sell cryptocurrency you have previously acquired, you are required to pay tax on that gain. And if you make a loss, you must record this as well. The most common way that people acquire cryptocurrencies is by buying them. Other ways to acquire cryptocurrencies include via airdrop and other novel distribution methods.

What Is Cryptocurrency for Tax Purposes in Australia?

According to the ATO’s tax treatment for cryptocurrencies, the term cryptocurrency not only describes bitcoin but also other cryptocurrencies that share similar characteristics with bitcoin.

Although an individual could argue that a cryptocurrency you hold is fundamentally different to bitcoin, the ATO will still likely deem that you are holding a taxable asset. That is to say, you are likely holding an asset that you must pay tax on if disposed of for a profit that is, income you have generated from holding the asset.

This is exactly the same tax treatment that applies when you sell shares on a stock exchange, for example.

Cryptocurrency Capital Gains Tax

Cryptocurrency tax evaders, the term ‘capital gain’ simply means the profit you make on a taxable capital asset. Taxable capital assets commonly held by individuals include shares, investment properties, collectables and, in more recent times, cryptocurrencies such as Bitcoin and Ethereum’s ether.

Simply, you can think of a taxable capital asset as something of value that you have purchased as in investment.

Capital Gains Tax (CGT)

Capital gains tax (CGT) is the tax you are required to pay on any capital gain made upon sale of the asset.

For example, if you purchase one bitcoin for A$60,000. You hold it for six months. The price of bitcoin goes up to $15,000. You decide to sell that one bitcoin.

To figure out your capital gain or capital loss you take the cost price and deduct it from the sale price. This equals a capital gain price.

To encourage long-term investing, Australians are able to halve their capital gains tax rate when they sell a taxable capital asset at least 12 months after acquisition. This is called the ‘capital gains tax discount’ or ‘CGT discount’.

Reporting Capital Gains & Losses In Australia

You are only required to report capital gains and losses once a year via the ATO. This reporting is completed in your tax return at income item (label) 18. By far the most common CGT event happens as a result of your selling of a taxable capital asset. Other ways that CGT events can be triggered include giving away a taxable capital asset.

It is essential to be aware that if you are investing simply as a hobby rather than operating as a business any losses you make cannot offset your other income (for example; salary). Instead, if you make a capital loss for the year, you’re able to carry it forward and use it to offset any future capital gains.

N