The Australian Tax Office (ATO) has said it cannot rely on crypto investors to track their crypto trades and profits, even though most investors are doing their best.
Speaking at the 14th ATAX International Tax Administration Conference on November 23, ATO Commissioner Chris Jordan pointed out that many new crypto investors may not fully understand their tax reporting obligations. :
“In an industry that is growing rapidly with new investors, we cannot rely on taxpayers knowing that they must keep records of their investment income and capital gains and disclose them in their tax returns.
“Our main concern is that many taxpayers believe their cryptocurrency earnings are tax exempt or only taxable when the holdings are cashed in Australian dollars,” he added.
Jordan explained that the ATO has been working on ways to “push” people in the right direction, such as pre-populating tax return data to entice crypto users to report their investments.
The commissioner also said that the ATO has stepped up its trading data matching capabilities in 2021 by sourcing information from cryptocurrency demand-side platforms (DSPs), stock registers and brokers.
“We have extended our data matching protocols to obtain more third party data to facilitate emerging investments like cryptocurrency.”
He added that “We are working hard to improve the way we collect, manage, share and use data, but we are only scratching the surface. ”
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Jordan noted, however, that “most people do the right thing” as tax compliance, or that the “tax performance” of individuals and small businesses in Australia is high with “little or no intervention” of ATO at 94% and 87% respectively.
Chainalysis at the bottom
One company that the ATO could use in the future is Chainalysis, a partner of the Commonwealth Bank of Australia.
On November 24, Chainalysis Australia and New Zealand Country Manager Todd Lenfield told the Australian Financial Review that his company hopes to provide key expertise to AUSTRAC and the ATO.
“We want to have conversations with AUSTRAC about what they are looking to regulate and explain to the tax office what lessons can be learned from what the IRS is doing. We can take advantage of the experience we have in the space and deliver a local flavor, ”he said.
The company currently provides blockchain analysis services for the US Federal Bureau of Investigation and Internal Revenue Service, it has also investigated Russia-based crypto firm Suex OTC, which has been targeted by the US Treasury Department in September for facilitating transactions for ransomware payments.