The Australia Tax Office is about to begin a large-scale ‘data matching’ program in which cryptocurrency exchanges will be forced to hand over information about the transactions of individual clients.
The Tax Office (ATO) will then check the information obtained from the exchange, matches the income details reported by the taxpayer.
The technique has traditionally been used in co-operation with major financial institutions, with more than 600 million transactions matched in the past financial year.
This year is the first time small and large cryptocurrency exchanges will begin being targeted for data matching.
“The ATO uses third party data to improve the integrity of the tax system by identifying taxpayers who fail to disclose their income details correctly,” said ATO Deputy Commissioner Will Day.
“We also use third-party data to assist taxpayers in meeting their tax obligations through pre-filling of tax returns.”
The data will be collected under legal notice on an ongoing basis.
It is estimated between 500,000 to 1 million Australians have invested in cryptocurrencies and the number is expected to significantly increase in the coming years.
Australian cryptocurrency tax evaders urged to fess up before it’s too late
So what happens if your crypto trading information is data-matched?
If everything adds up, you won’t even know you’ve been under the microscope, however, if inconsistencies are discovered – expect a phone call!
After being contacted by the ATO you will be given an opportunity to verify the information collected, before any action is taken.
People will be given at least 28 days to clarify any information that has been obtained from the crypto exchange.
People can correct a mistake by requesting a self-amendment or making a voluntary disclosure.
But the ATO says if a crypto trader thinks they’ve made a tax reporting ‘mistake’, the best thing they can do is fess up.
“We want to help taxpayers to get it right and ensure they are paying the correct amount of tax,” said Mr Day.
“Where people find that they have made an error or omission in their tax return they should contact the ATO as soon as possible.
“Penalties may be significantly reduced in circumstances where we are contacted prior to an audit.”
Do you have crypto tax tips? Contact us at firstname.lastname@example.org