The Australian Tax Office has issued guidance on accurately accounting cryptocurrency transactions during tax time. It noted that it will be looking to make sure that all crypto capital gains are reported correctly.

Adam O’Grady, the assistant commissioner of the Australian Taxation Office, warned tax agents and individuals about how all capital events related to cryptocurrency transactions will be surveyed thoroughly during tax time.

The ATO is looking to ensure that all crypto capital gains and losses are reported accurately.

Tax agents should ensure they use the data pre-filled by the ATO to submit accurate returns, according to the assistant commissioner. The tax office will also be cross-referencing the figures with data supplied by Australian cryptocurrency exchanges, Australian data scientists and revenue offices. The ATO also have a very good pre-filled data service regarding shares transactions available for tax agents to download for their clients.

If someone has had significant crypto capital gains events and it has not been reported in the return, the ATO will be cross checking the return against their data and will hold the returns for further questioning with the tax agent and individual.

To avoid getting caught up in the Tax Office’s scrutiny, accurate capital gains & also losses reporting is very important for investors. One of the emerging themes in the capital gains space is that investors are not reporting the losses through the tax return. It is vital to also declare all losses, as it stops the ATO having to investigate it further with the individual if they discover that losses hadn’t been declared for the year.

This warning comes as the crypto market prepares for a major crackdown by the ATO. The Tax Office has also assigned substantial resources into cryptocurrency data matching to promote the tax compliance of transacting crypto assets.

It was announced that the ATO will work with designated service providers to collect buyer and seller data related to crypto assets and calculate related transactions. The Tax Office then uses this information to identify individuals who may be failing to meet their registration, payment or tax obligations.

The ATO took a good-faith approach to those who failed to comply with their crypto asset tax requirements last year. However, it isn’t expected to last much longer. Cryptocurrency investors should pay attention to the tax obligations before the ATO ramps up its enforcement of undeclared crypto assets.

Since the ATO started gathering information from various cryptocurrency exchanges, the data has helped them gain a better understanding of the market. The Australian Taxation Office has been gradually auditing cryptocurrencies for the last three years. Its light touch will likely end soon.

The ATO first started cracking down on capital gains and losses compliance in March last year. It sent out letters to individuals who were not appropriately recording their gains or losses and had been flagged due to a mismatch in their data. This has been prompting a lot of people to come in to see their tax agent, or maybe to see a tax agent for the first time if they’ve been doing it themselves.

If you need assistance in meeting your cryptocurrency tax obligations, please contact our office.