Cryptocurrency is one of the many ways people make money nowadays. It can be bought or sold on an exchange platform using conventional money. Some popular digital currencies like Bitcoin can be bought or sold for cash through special ATMs. Cryptocurrencies operate independently of central banks, central authorities or government. Cryptocurrency exchange platforms are generally not regulated.
With the complex nature of cryptocurrencies, it is not surprising that there is a lack of awareness of the tax obligations associated with these activities. Likewise, the pseudonymous nature of cryptocurrencies makes it attractive to those seeking to avoid their taxation obligations and launder money.
Governments around the world have been trying to ensure they tax the revenue from cryptocurrencies. In Australia, cryptocurrency gains are taxable under the capital gains tax regime. However, getting data related to these transactions has been difficult. There were limited obligations for third parties to provide the information.
In line with this, the ATO makes use of the data matching program to ensure people are disclosing income correctly. It seeks to obtain data from cryptocurrency designated service providers where the data owner or its subsidiary operates a business in Australia that is governed by Australian law.
Data matching is a powerful administrative and law enforcement tool. Information from a variety of third-party sources is compiled electronically, validated, analysed and used for a range of education and compliance activities.
Data matching allows the ATO to:
• pre-fill tax returns, making it easier for everyone to lodge their tax
• reassure the community that we protect honest people and businesses from unfair competition
• ensure people and businesses
o lodge tax returns and activity statements when required to do so
o correctly declare their income and claim offsets and other benefits
o comply with their obligations.
It allows the ATO to detect people and businesses operating outside the tax system, detect fraud against the Commonwealth, and recover debt.
A webinar on “The ATO and Data Matching” discusses thoroughly how the Taxation Office makes use of data matching to ensure proper declaration of income. To subscribe, visit www.effectivepd.com.au. Effective PD offers an innovative way for busy accountants to be on top of their game with continuing professional development in a brief, flexible and easy way.
