Aussie crypto owners to be targeted by ATO this financial year

Cryptocurrency traders are being warned the ATO will apply extra scrutiny in the upcoming tax season. Here’s what you need to know.

Cryptocurrency traders will be under extra scrutiny by the Australian Taxation Office in the at the end of this financial year, industry experts say.

The tax season, when millions of Australians will begin filing their returns, starts at the beginning of the next financial year, July 1.

The ATO has been ramping up warnings in previous years regarding unreported or under-reported cryptocurrency gains and losses, as more Australians are investing larger sums in the maturing currency.

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Cryptocurrency traders are being warned that the ATO will apply extra scrutiny in the upcoming tax season. Picture: Ozan Kose/AFP

H&R Block’s director of tax communication Mark Chapman echoed this, and said the ATO will focus on – among other things – cryptocurrency profits.

“The ATO will also be taking a closer look at the booming market in investments in cryptocurrencies like bitcoin,” he said in an interview with Channel 7.

“Increasing numbers of taxpayers are jumping on the bandwagon and the ATO believes that some of them are failing to declare the profits (and in some cases the losses) they are making on their investments.”

The ATO last year issued a warning on the false perception that the anonymity of cryptocurrency and non-fungible token trades made them immune from ATO probity.

“While it appears that cryptocurrency operates in an anonymous digital world, we closely track where it interacts with the real world through data from banks, financial institutions, and cryptocurrency online exchanges to follow the money back to the taxpayer,” said assistant commissioner Tim Loh.

Mr Chapman said the ATO then matches data from these sources to track down undeclared proceeds.

“To help them in their search, the ATO is collecting bulk records from Australian cryptocurrency designated service providers as part of a data-matching program to ensure people trading in cryptocurrency are paying the right amount of tax,” he said.

The Australian Taxation Office at Lang Street in Sydney. Picture: Tom Compagnoni/AAP

“Data to be provided to the ATO will include cryptocurrency purchase and sale information. The data will identify taxpayers who fail to disclose their income details correctly.

“Remember, investing in cryptocurrencies can give rise to capital gains tax on profits. Traders can be taxed on their profits as business income.”

Over 850,000 Australians own cryptocurrency according to TripleA, a cryptocurrency firm.

The ATO said it wrote to around 100,000 Australians “urging” them to review their previously lodged tax returns in relation to their cryptocurrency investments, and prompted 300,000 more to report relevant gains and losses from digital currencies.

Another focus of ATO investigation will be work-related deductions, said Mr Chapman.

“The ATO believes that work-related expense claims are the biggest element in that ‘tax gap’ and have signalled that they’ll be looking closely at these deductions this year.”

The ATO last year warned about this too, saying that it expected less deductions claimed for car, travel, and clothing expenses for people working from home.

“We will also look closely at anyone with significant working from home expenses, that maintains or increases their claims for things like car, travel or clothing expenses,” said Mr Loh at the time.

“You can’t simply copy and paste previous year’s claims without evidence.

“But we know some of these unusual claims may be legitimate. So, if you explain your claim with evidence, you have nothing to fear.”