May 2019

The Australian Taxation Office (ATO) recently issued a warning, stating that they are beginning a new data-matching programme that will compare data collected from designated service providers (DSPs) with tax records. The central aim, according to the government, is to ensure that crypto-investors are paying the right amount of tax.

The programme will also include other agencies like the Australian Securities and Investment Commission (ASIC) and the Australian Transaction Reports and Analysis Centre (AUSTRAC), and will form part of the on-going effort to combat the black-market economy.

The ATO’s statement argued that technology used for blockchain and cryptocurrency trading is “an enabler of existing risks.”

“Cryptocurrency has been used to move funds within the black economy, hide money offshore, and is sometimes linked to risks with unexplained wealth and undeclared taxable capital gains,” read the statement.

 Deputy Commissioner of the ATO, Will Day, said the taxation office use of third-party data would help them better identify taxpayers who have not correctly disclosed their income details.

"We are looking at whether the taxpayer has omitted capital gains on the sale of cryptocurrencies," Mr Day said.

This effects of the move could be widespread, as the ATO suspects there are up to a million Australians who have invested in crypto-assets.

Day said that investors who are audited may be contacted by the ATO, and will then be given at least 28 days to clarify any information. Those who voluntarily contact the ATO prior to an audit will receive softer penalties.



Adam Poulton, Blockchain Australia’s president, welcomed this announcement. Speaking on behalf of the other cryptocurrency investors, Poulton said, “there’s a lot more work to do in regulation.” He added that regulations are how “the market matures from the 'wild west' environment we had five or six years ago.”

Poulton went on to say Blockchain Australia does not support those who use cryptocurrencies to avoid taxes, as “cryptocurrency is like cash.”

Similarly, Nick Giurietto, chief executive of the Australian Digital Commerce Association (ADCA), says DSPs represented by ADCA would support the ATO’s move to treat crypto-assets the same way they treat other assets.

“ADCA is keen to work with the ATO to ensure that the data requested by the ATO is collected in a manner that is as consistent and efficient as possible,” Giurietto told The Age.  



However, not everyone finds the ATO’s plan to be a step in the right direction. CPA Australia’s Paul Drum expects a high level of non-compliance because, in his words, “people have made extraordinary gains – some in the millions of dollars – and may now face both significant tax bills including tax penalties.”

Drum questioned whether those who are targeted can afford to pay the penalties which – as the Australian Financial Review (AFR) reports – could be up to “75 per cent of an unpaid tax bill, plus interest.”

Drum argues this type of difficulty will especially apply to crypto investors who made significant gains in the past, however due to the changing value of Bitcoin will no longer be able to pay tax on previous gains.

“For example, Bitcoin rose from $500 in 2015 to over $20,000 in 2017. It is now trading at around $7300. Some taxpayers will have undeclared prior year realised gains that have not been declared, and now have realised losses that cannot be carried back and offset against these gains



         Chartered Accountants

Tax Institure