Trades in cryptocurrency leapt 64 per cent in 2021 and the ATO is using data matching to make sure nothing slips through the net, acting assistant commissioner Sylvia Gallagher said last week.
With more than half a million Aussies buying, selling or exchanging digital coins, she said: “If you’re not already paying attention then you really should be.”
“It’s something that people are starting to get into,” Ms Gallagher told the Accountants Daily Strategy Day in Sydney. “My kids’ friends all have crypto coins, and they’re 18!”
She said the ATO has been using data matching on crypto since 2019 and had transaction records going back to 2014.
“We’re keeping a really close eye on it,” she said.
“We have a lot of information and we do use this data to ensure that people are meeting their tax obligations and there’s a level playing field.”
Ms Gallagher said accountants should check with their clients about cryptocurrency activity and stressed that for the purposes of assessment for capital gains tax, three types of transaction should be recorded:
- Selling or gifting crypto
- Trading or exchanging crypto, including one digital currency for another
- Converting crypto to a fiat currency, such as Australian dollars
Depending on the circumstances, different tax treatments would apply.
Where crypto was transferred from one wallet to another with maintenance of ownership it would not attract CGT unless the holding was reduced, for example by transaction fees. In that case it became a disposal, and hence a CGT event.
However, if crypto was disposed as part of a business then the profit was assessable as income, not CGT. Also if a business or sole trader was paid in crypto, then it was treated as income (and valued in Australian dollars).
Where crypto was sold or exchanged in the ordinary course of doing business, trading stock rules applied. The proceeds from the sale of cryptocurrency held as trading stock in a business were ordinary income, and the cost of acquiring cryptocurrency held as trading stock was deductible.
In addition, she said: “Gains or losses from disposing of a crypto for personal use is not a capital gains transaction.”
With 600,000 Australians now holding digital currency, Ms Gallagher said the ATO website contained detailed guidelines on the treatment.
Ms Gallagher will present at a second Accountants Daily Strategy Day this Wednesday (9 March) in Melbourne.
Philip King is editor of Accountants Daily and SMSF Adviser, the leading sources of news, insight, and educational content for professionals in the accounting and SMSF sectors.
Philip joined the titles in March 2022 and brings extensive experience from a variety of roles at The Australian national broadsheet daily, most recently as motoring editor. His background also takes in spells on diverse consumer and trade magazines.