ATO throws data dragnet for cryptocurrency tax crackdown

The Australian Taxation Office will begin electronically analysing the tax affairs of Australians that hold and trade cryptocurrency to ensure they are paying the correct amount of tax.

The ATO revealed on Tuesday that it had begun collecting bulk records from Australian-based cryptocurrency businesses under a new data matching program.

It comes amid what the agency describes as “significant growth” in digital currency in recent years, with between 500,000 and one million Australians estimated to have investments in crypto-assets.

Data to be provided by Australian cryptocurrency designated service providers (DSPs) will include cryptocurrency purchase and sale information, which the ATO will then use as the basis for its compliance activities.

Deputy Commissioner of Integrated Compliance Will Day said the data would be used “to improve the integrity of the tax system by identifying taxpayers who fail to disclose their income correctly.”

“We also use third-party data to assist taxpayers in meeting their tax obligations through pre-filling of tax returns,” he said.

“This data will be collected under notice from the DSPs on an ongoing basis.”

However, before any compliance action is undertaken, the ATO said it would contact people to clarify any information that had been obtained.

“We want to help taxpayers to get it right and ensure they are paying the correct amount of tax,” Day said.

“Where people find that they have made an error or omission in their tax return they should contact the ATO as soon as possible.”

The Tax Office is also working with global and local regulator like the Australian Transactions Reports and Analysis Centre (AUSTRAC) and the Joint Chiefs of Global Tax Enforcement (J5) to investigate cryptocurrency-related tax evasion and money laundering.

It pointed to the use of cryptocurrency as a vector for the movement of funds within the black economy, to hide money offshore, and in some instances, were “linked to risks with unexplained and undeclared taxable capital gains”.

Earlier this week, the Australian Competition and Consumer Commission revealed that Australians lost at least $6.1 million to cryptocurrency-based scams last year.

The highest reported loses were attributed to investment scams, whereby individuals are duped into dummy investment opportunities such as fake initial coin offerings.