The ATO has made it very clear that they have the power to track crypto and will not hesitate to contact taxpayers who are not following the rules. The ATO has made it clear that Australians who have sold, traded or earned cryptocurrency will need to report that in their annual income tax return.
After the data matching exercise is undertaken the crypto investor might be contacted by the ATO. The reason the crypto investor is contacted is for them to verify the information collected, before any compliance action is undertaken.
The ATO states that people will be given at least 28 days to clarify any information that has been obtained from the data provider.
Whenever a taxpayer discovers that they have made an error or omission in their tax return, they are encouraged to contact the ATO as soon as possible. The sooner you contact the better because penalties you receive might be significantly reduced where the ATO has been contacted prior to them undertaking an audit.
If investors make a mistake, they can request a self-amendment or make a voluntary disclosure, and if they need assistance paying their taxes, they can contact the ATO.
If you find yourself in the situation of receiving a data-matching letter from the ATO you must receive your records. The action you take will depend on whether you agree or disagree with the information the ATO has included in your letter.
If You Agree
You should compare the information contained in the letter against your records such as your bank and private health insurance statements.
If you agree with the information in your letter, you will not be required to contact the ATO. This is because if you agree to the information provided in the letter, the ATO will automatically send you an amended assessment.
If you the taxpayer notices that, in addition to the amounts the ATO have shown, you have omitted income from other sources or from the same source in other income years, you should give the ATO the details so they can include it in your amended assessments.
It is important to keep in mind that you might receive another letter in the future if you fail to declare all your income. The ATO has strict policies and is always checking closely to discover missing, inaccurate or incomplete information on tax returns.
If You Disagree
If you disagree with the information the ATO has said they have, you will need to contact the ATO within the timeframe outlined in the letter you received.
The ATO might then ask you to provide supporting documentation.
If You Lodged Via a Tax Agent
If you have decided to lodge via a tax agent you are responsible for all information on your tax return even if a tax agent completes it for you.
It is super important to ensure that you bring all relevant facts to the attention of the agent or adviser. You are expected to honestly answer any questions asked by the agent regarding the preparation of your tax return.
The ATO Issues Warning Over Unpaid Crypto Related Taxes
The Australian Tax Office (ATO) is encouraging accounting professionals to engage with their clients on their cryptocurrency related activity.
The ATO acting assistant commissioner, Sylvia Gallagher, confirmed that people as young as 18 years were getting involved in cryptocurrency trading and that the authority was paying attention.
Cryptocurrency trade reportedly increased by 64 percent in 2021 as over half a million Australians engaged in trading digital coins. The ATO is reminding taxpayers that data matching is ongoing, and efforts are being made to ensure no activity slips past them.
Sylvia Gallagher outlined that much information had already been collected and would be used to ensure a level playing field as taxpayers met their obligations.
Sylvia Gallagher further flagged three types of transactions that required recording on returns. This included selling or gifting of cryptocurrency, trading or exchanging cryptocurrency, and converting crypto into fiat money.
It was outlined that depending on the situation, different tax measures will apply. For instance, where crypto was transferred from one wallet to another without a change in ownership, no capital gains tax (CGT) would apply. The ATO website explains that “if your cryptocurrency holding reduces during this transfer to cover the network fee, the transaction fee is a disposal and has capital gain consequences”.
For a cryptocurrency that is disposed of as part of business assets, the profit was assessable as income and not CGT. Businesses that received payment in the form of crypto should also consider this as part of their income and value it in Australian dollars.
Sylvia Gallagher however confirmed that gains and losses made from trading in crypto designated for personal use were not subject to CGT. She advised taxpayers to refer to the guidelines posted on the ATO website on the tax treatment of cryptocurrency transactions.
The ATO and other State & Federal government revenue authorities in Australia will continue to find new ways to deal with those taxpayers that are not paying their fair share of tax or meeting their financial compliance obligations – more than ever that applies to cryptocurrency trade.
As official reviews, audits, investigations, and inquiries of taxpayer lodged returns and their taxation affairs in general continue to remain prevalent, the best course of action is to ensure that your accounting firm has a comprehensive tax audit insurance solution such as Audit Shield in place.
The Team at Vault is here to help, offering a full range of financial products to assist you with your financial objectives. Contact the Team at (07) 3012 6724, email us at firstname.lastname@example.org or use the chatbot below to schedule a meeting.