ATO's Stricter Approach to Crypto Tax Compliance

The Australian Tax Office (ATO) has announced it is monitoring crypto profits closely for fiscal compliance this financial year that ends today, June 30, 2024. ATO officials have made changes to crypto tax compliance this year and launched an improved data matching program to ensure accurate reporting.

Adam Saville-Brown, General Manager of Koinly, a crypto tax reporting software company, states that the ATO has been monitoring the crypto space for years.

The new program shows a stricter approach and allows the ATO to gather transaction data from any legally operating crypto exchange, including platforms like Binance, Coinbase, and CoinSpot.

Comprehensive Data Collection

The ATO's data collection program gathers a wide range of information, such as names, addresses, emails, social media accounts, and IP addresses of about 1.2 million crypto investors annually. This detailed data helps the ATO cross-check tax returns and find discrepancies.

ATO Nudges Crypto Tax Noncompliance

Saville-Brown acknowledges that most crypto investors in Australia know their tax reporting obligations, but the enhanced data collection program aims to address noncompliance. The ATO will send a reminder letter to those needing to report their crypto transactions accurately.

Impact of Celsius Collapse

The collapse of Celsius, a prominent American crypto lender, has added complexity to the crypto tax landscape. The ATO still needs to clarify the tax implications for Celsius users receiving repayments in Bitcoin and Ether, leaving many users confused and potentially impeding accurate tax reporting.

Michelle Legge, Koinly's Tax Education Head, highlights the current ambiguity surrounding cost basis calculations for crypto assets.

Investors are still determining whether to use traditional accounting methods or alternative approaches, such as the original purchase price or the asset's value at a specific time, like when withdrawals were restricted or when Celsius filed for bankruptcy.

Saville-Brown emphasizes the importance of consulting with an experienced accountant to navigate the complexities of Celsius refunds. These repayments could be classified as either taxable gains or losses, and professional guidance can help investors ensure accurate tax reporting.

Bitcoin ETFs Tax Reality

The introduction of Australia's first two spot Bitcoin exchange-traded funds (ETFs) in June 2024 marked a significant milestone for cryptocurrency adoption.

One of these ETFs directly holds Bitcoin, another first for the Australian market. However, investors should know that current tax laws still apply.

According to Legge, selling holdings at a profit from a Bitcoin ETF will incur Capital Gains Tax just like any other investment. While Bitcoin ETFs make crypto investing easier for many Australians, these transactions will still lead to a tax obligation.

"The ATO's enhanced data collection program aims to address noncompliance among crypto investors."

The ATO's new data collection program shows a stricter approach to crypto tax compliance. With the ability to gather detailed transaction data, the ATO aims to ensure accurate reporting and address noncompliance among crypto investors.

The complexities brought by the collapse of Celsius and the introduction of Bitcoin ETFs further highlight the need for professional guidance in navigating the crypto tax landscape.