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Crypto crackdown coming for your tax return

Tuesday, May 17, 2022

The ATO will keep a close eye on those who cast a line out into the cryptocurrency market but fail to disclose their assets and capital gains.
The ATO will keep a close eye on those who cast a line out into the cryptocurrency market but fail to disclose their assets and capital gains

Australians who have acquired or sold cryptocurrency via an overseas trading account have been advised to check whether they have tax obligations abroad and to start using crypto accounting software.

The warning from the Australian Taxation Office came as it listed cryptocurrencies as a top priority this year, warning it would crack down on digital currency holders who fail to disclose their transactions when filing a tax return.

Assistant Commissioner Tim Loh said the tax office had seen a number of people already make mistakes when disclosing assets, and that cryptocurrency losses could not be offset against salary or wages.

“Through our data collection processes, we know that many Aussies are buying, selling or exchanging digital coins and assets, so it’s important people understand what this means for their tax obligations,” he said.

The ATO is likely to see people with large cryptocurrency losses after the crash of popular coin Terra, a moment many describe as the crypto equivalent of Black Wednesday.

The sharp fall in Terra, an algorithmic stablecoin using smart contracts and code to peg its value to the US dollar, has forced several platforms including the popular Swyftx to halt trading of the currency.

ATO assistant commissioner Tim Loh. Picture: ATO
ATO assistant commissioner Tim Loh. Picture: ATO

Cryptocurrency’s turn under the microscope comes after last year’s crackdown on work-from-home claims, which saw the ATO cast a close eye over travel expenses during lockdowns.

“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year,” Mr Loh said. “Remember you can’t offset your crypto losses against your salary and wages.”

Cryptocurrencies, according to the ATO, “generally operate independently of a central bank, central authority or government”.

Australians who are “involved in acquiring or disposing of cryptocurrency” are required by law to keep records of their transactions. However, cryptocurrency must only be reported to the ATO when a capital-gains tax event ­occurs.

A CGT event includes the trading, selling or gifting of crypto, exchanging one crypto asset for another, converting crypto to a fiat currency, and using crypto to obtain goods or services, the ATO spokeswoman said.

“We find that many traders are failing to keep good records when they buy, sell, or trade crypto, leading to errors or omissions on the tax return,” she said.

Cryptocurrency owners have been advised to keep a record of agent, accountant and legal costs, digital wallet records and keys, exchange records and software costs related to managing tax affairs.

Records must include the date of the transaction, the value of the cryptocurrency in Australian dollars at the time of the transaction and what the transaction was for.

Australians who have suffered recent financial losses in crypto will be able to bring their losses forward to offset later gains.

“If a capital loss is made from a disposal of crypto, the capital loss can only be used to offset current and future year capital gains and can’t be offset against your other income. Capital losses must be reported in the year they occur,” the ATO spokeswoman said.

Those who have used overseas cryptocurrency providers may be bound by another country’s tax responsibilities.

Other key areas under close watch this year include record-keeping, work-related expenses and rental property income and dedication.

“The ATO is targeting problem areas where we see people making mistakes,” Mr Loh said.

For information on the tax treatment of cryptocurrencies visit


REPORTER – The Australia 17.05.2022

Roseby Rosner & Young is a Certified
Practicing Account

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