Australia tax agency warns digital currency owners against tax evasion

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The Australian Taxation Office (ATO) is sending a warning to all digital currency owners in the country against failing to pay their taxes. It reminded the community that it has partnered with most digital currency exchanges and it has all their trading data. Failure to pay the applicable taxes will attract penalties, and possibly an audit.

Assistant Commissioner Tim Loh said that one of the biggest myths Aussie investors have is that digital currencies are a currency. However, Loh noted that the ATO treats them like an asset—and as with all other assets, it’s subject to capital gains tax.

Speaking to a local news outlet, Loh revealed that the agency’s data shows over 600,000 Aussies have invested in digital currencies. This year, the agency will be sending letters to around 100,000 taxpayers with digital currency holdings, urging them to review their previously lodged returns. In addition, it will prompt a further 300,000 people as they lodge their 2021 tax returns to report their digital currency holdings.

Australian digital currency users have in large assumed that digital currencies are anonymous and that they can get away with tax evasion. However, the agency has been one step ahead, Loh told the outlet. The ATO has been tracking the channels through which these digital tokens interact with the traditional financial system. This includes working with the banks, the payment services providers and the digital asset exchanges, all of whom have been very cooperative.

“We follow the money trail back to the taxpayer and we do that through the ATO which has data matching profiles with cryptocurrency exchanges and they provide that information to us and we use that information to cross match with people’s tax returns,” he explained.

He added, “There isn’t a game of hide and seek. We have got that information and all we are asking people to do is follow the rules.”

The taxman shot a warning to those that are considering evading their tax obligations, reminding them that the agency will catch up with them. When it does, they will face tough penalties and even possible audits. However, those who have evaded their tax obligations but turn up at the ATO’s offices and seek to make amends will face ‘significantly reduced penalties.’

In Australia, gains from digital currencies fall under capital gains tax, just as with income from stock trading. For businesses accepting digital currency payments, the ATO will tax it as income based on the Australian dollar value.

See also: CoinGeek Live panel, Digital Currency & Global Compliance: Tools & Tips for Exchanges, Wallets & Other Service Providers