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Australian Tax Office (ATO) Outlines Crypto Capital Gains in New Crackdown

The Australian Tax Office (ATO) has identified capital gains from crypto assets as one of four main areas of concern for Tax Time 2022, to crack down on the mistakes and act on them. On Monday, the ATO announced the four focus areas it will target this financial year, including work-related expenses, capital gains made from crypto assets, record-keeping, and real estate income and deductions.

If the Australians bought or sold assets such as NFTs, shares, properties, or cryptocurrencies, they would need to calculate capital gains or losses from those assets and report them in tax returns this year. The ATO was alarmed by people’s aloofness regarding tax obligations incurred in the decentralized system.

The office is already aware of people’s involvement in cryptocurrency transactions through the reports received from crypto exchanges and financial institutions. To avoid tax penalties, the ATO expects people to cooperate.

Tim Loh, Assistant Commissioner at the ATO, said: “People still consider cryptocurrency ordinary currency rather than an asset. We want to rid Australians of the misconception that crypto capital gains are tax-free or need to be filed only when cashing back out to fiat money.”

“We know most Australians follow the rules. We now want the rest of them to be diligent with their taxes,” he added.

In 2021, the ATO said that more than 600,000 Australians have invested in cryptocurrencies and other digital assets in recent years.

The ATO Would Like to Take Its Share

Just because you’ve managed to take your profits out before the crypto and stock markets hit a free fall, does not mean the tax office will remain silent. Particularly when it comes to record-keeping, capital gains from buying or selling crypto-assets, or even NFTs.

Mr. Loh said, “We will be targeting ‘problem areas’ where people made the most common ‘mistakes’ and will require them to rethink their claims. We know that people are purchasing, selling, and exchanging crypto-assets and they should be aware of their tax obligations.”

“Keep in mind that you can’t offset your crypto losses against your corporate incomes or work-related expenses,” he added.

The ATO further said that the tax office will take legal action against anyone who attempts to increase their refunds, submit false documents, or cannot validate their claims. This also holds valid for rental properties and shares. Real estate owners have received notices from the ATO urging they add the total income they have received from the rental in their tax returns.

“The innovative and highly volatile nature of cryptocurrencies can result in a serious lack of awareness of the tax obligations. In addition, a lot of people are choosing to avoid their tax obligations because of the pseudonymous nature of cryptocurrencies and all digital assets,” The ATO said.

The ATO added it had been collecting crypto transactions through the data collection processes from Australian-based crypto platforms dating back to the 2014-2015 financial year in order to match data related to tax returns.

While the majority of data people need to file their tax returns is auto-filled nowadays, it’s not as easy as logging into the official website and hitting the ‘Submit’ button.

“While we have extracted and matched many data on property income, foreign-sourced income, and capital gains involving digital assets and cryptos, we don’t auto-fill all of the data for you,” Mr. Loh said.