Australian Tax Office warns cryptocurrency traders to report gains.
The Australian Tax Office is warning would-be cryptocurrency and NFT Token millionaires that any gains they’ve made off the booming digital revolution must have tax paid on it.
This month the ATO reminded taxpayers capital gains tax (CGT) applies to cryptocurrency, as it does to the disposal of non-fungible tokens or NFTs.
The tax office also busted rumours that crypto gains are only taxable when holdings are cashed back into Australian dollars.
More than 600,000 Aussie taxpayers are thought to hold cryptocurrency assets.
“We are alarmed that some taxpayers think that the anonymity of cryptocurrencies provides a licence to ignore their tax obligations,” ATO Assistant Commissioner Tim Loh said.
“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.”
The ATO matches data from cryptocurrency designated service providers to individuals’ tax returns, helping ensure investors are paying the right amount of tax.
“We know cryptocurrencies can be complicated. That’s why our focus is on helping people get it right,” Mr Loh said.
“The best tip to nail your cryptocurrency gains and losses is to keep accurate records including dates of transactions, the value in Australian dollars at the time of the transactions, what the transactions were for, and who the other party was, even if it’s just their wallet address.”
Last year, the ATO directly contacted around 100,000 taxpayers who had traded in cryptocurrency and prompted 140,000 taxpayers at lodgement.
“This year, we will be writing to around 100,000 taxpayers with cryptocurrency assets explaining their tax obligations and urging them to review their previously lodged returns,” Mr Loh said.
“We also expect to prompt almost 300,000 taxpayers as they lodge their 2021 tax return to report their cryptocurrency capital gains or losses.”
Despite the ominous warnings, Mr Loh said if a taxpayer realises they have submitted a return with an error they will not be punished heavily if they need it corrected.
“If you realise you’ve made a mistake and correct your return, we will significantly reduce penalties,” Mr Loh said.
“However, failing to report on crypto-assets and not taking action when reminded will prompt penalties and potentially an audit.”
Australians who have invested in cryptocurrency or sold NFTs can check their tax obligations via the ATO’s fact sheet here.
Sources: MyBusiness.com.au & The Australian Taxation Office.