The Australian Taxation Office asserts that it cannot depend on cryptocurrency users’ own records

“Our primary worry is that many taxpayers think their cryptocurrency earnings are tax-free or are taxable only when the cryptocurrency assets are converted to Australian dollars,” the ATO commissioner said.

The Australian Taxation Office (ATO) has said that it cannot depend on cryptocurrency investors to maintain track of their transactions and earnings – despite the fact that the majority of investors make an effort.

On Nov. 23, ATO commissioner Chris Jordan said at the 14th International ATAX Conference on Tax Administration that many new cryptocurrency investors may be unfamiliar with their tax reporting obligations:

“In a fast developing industry with new investors, we cannot depend on taxpayers to understand the need of maintaining records of investment income and capital gains and disclosing them on their tax returns.”

“Our primary worry is that many people assume cryptocurrency profits are tax-free or are taxed only when assets are converted to Australian dollars,” he said.

Jordan stated that the ATO has been exploring measures to “nudge” individuals in the correct direction, including pre-filling data on tax forms to persuade cryptocurrency users to declare their investments.

Additionally, the commissioner said that the ATO enhanced its trade data matching capabilities in 2021 by obtaining data from cryptocurrency demand-side platforms (DSPs), stock registries, and brokers.

“We’ve broadened our data matching procedures to get more data from other sources to aid in the development of emergent assets such as bitcoin.”

“We are working diligently to improve the way we gather, handle, distribute, and utilise data,” he said, “but we are just scratching the surface.”

Jordan did remark, however, that “most people do the right thing,” as tax reporting compliance, or “tax performance,” for individuals and small companies in Australia is high, at 94 percent and 87 percent, respectively, with “little or no interference” from the ATO.

The ATO may contact Chainalysis, a partner of the Commonwealth Bank of Australia, in the future. On Nov. 24, Todd Lenfield, Chainalysis’s national manager for Australia and New Zealand, told the Australian Financial Review that his company hopes to contribute critical knowledge to AUSTRAC and the ATO.

“We want to speak with AUSTRAC about the areas they want to regulate and to communicate to the tax office the lessons learnt from the IRS’s actions. We can use our knowledge in the industry and infuse it with a regional flavour,” he said.

The firm currently provides blockchain analysis services to the Federal Bureau of Investigation and Internal Revenue Service in the United States. It also investigated Russia-based cryptocurrency business Suex OTC, which was targeted by the United States Treasury Department in September for facilitating ransomware payments.

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