In brief
- The Australian Taxation Office expects to prompt as many as 300,000 cryptocurrency investors to report their capital gains.
- The agency has warned that cryptocurrencies and non-fungible tokens (NFTs) are still subject to normal capital gains taxes.
We do the research, you get the alpha!
The Australian Taxation Office (ATO) has warned that many crypto investors are in for a surprise if they think their gains are “only taxable when the holdings are cashed back into Australian dollars.”
Instead, the regulator said investors face capital gains taxes even when they exchange one cryptocurrency for another.
In an announcement released on Friday, the agency said that it has noticed “a dramatic increase” in crypto trading activities, with more than 600,000 Australians having invested in digital assets in recent years.
According to assistant commissioner Tim Loh, the ATO is specifically “alarmed that some taxpayers think that the anonymity of cryptocurrencies provides a license to ignore their tax obligations.”
To ensure that investors are paying the right amount of tax, Loh also said that the agency matches data from cryptocurrency service providers, including exchanges, to individuals’ tax returns.
Importantly, capital gains taxes also apply to the sale of non-fungible tokens (NFTs)–cryptographically unique tokens linked to digital content such as images or music.
Crypto can be complicated
The agency said it expects to prompt as many as 300,000 taxpayers to report their cryptocurrency capital gains or losses before October 31, Australia’s tax day. In addition, around 100,000 crypto investors will receive letters “urging them to review their previously lodged returns.”
Last year, the Australian tax department prompted some 140,000 taxpayers to report their cryptocurrency gains, with around 100,000 investors being asked to review their previous tax filings.
“We know cryptocurrencies can be complicated. That’s why our focus is on helping people get it right,” added Loh.
To help crypto investors navigate the existing rules, the ATO has created a fact sheet containing useful tips and information.
Today’s announcement by the ATO comes in the wake of Australia’s Financial Services Minister Jane Hume's statement that cryptocurrencies are part of individuals’ personal choice and responsibility.