- The Australian Tax Office has urged investors to report returns made on cryptocurrency, news.com.au reported.
- Crypto is classed as a taxable asset in Australia, which many investors are unaware of.
- Despite anonymity being a key component of crypto, investments are tracked by authorities.
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Australian crypto investors must report their profits to the Australian Tax Office or risk penalties for tax evasion, assistant commissioner Tim Loh told news.com.au. Crypto is classed by the ATO as an asset, not a currency, and so is taxable – something many investors are unaware of, he said.
The ATO will contact around 400,000 people in 2021 to ask them to review their previous statements about cryptocurrency investments or to divulge the profits and losses they made on these, news.com.au reported.
Crypto assets and investments are treated in the same way as shares under the capital gains tax framework, and Loh said he was “alarmed” about how few taxpayers knew this. Any time a cryptocurrency is traded for a fiat currency or another cryptocurrency, tax laws apply. The same is true if it is used to purchase, sell or swap non-fungible tokens.
Anonymity of ownership is a key component of cryptocurrency systems and has helped drive its popularity. But Australian authorities have been able to track crypto investments by comparing tax return details with data provided by crypto exchanges, banks and other financial institutions, Loh said, meaning the authorities know who has invested.
“There isn’t a game of hide and seek. We have got that information and all we are asking people to do is follow the rules.”, Loh told news.com.au.
The recent slump and volatility in cryptocurrency prices has been attributed, in part, to repeated warnings from government officials that they will get tougher on enforcement of crypto regulation, and to their hints that tighter regulation is coming.
As in Australia, US tax authorities require investors to report gains and losses on crypto, which the Internal Revenue Service likewise views as an asset. The Biden administration said earlier this week that it plans to crack down on crypto taxes and crypto-related tax evasion.