The ATO has announced it will access the records and personal information of 500,000 to 1 million Australians in a crackdown of cryptocurrency trading.
The program will “identify individuals or businesses [that] have or may be engaged in buying, selling or transferring cryptocurrency”, covering FY2014-15 to FY2019-20.
“The data obtained will be used to identify the buyers and sellers of crypto-assets and quantify the related transactions”, the ATO said in the gazette notice announcing the program. This data will then be used to “identify individuals who may not be meeting their registration, reporting, lodgement and/or payment obligations” with the tax office.
The ATO will have a significant amount of data to draw on, including names, addresses, email addresses and social media accounts, including Facebook, Twitter and others.
The Tax Office will also be able to access information from “cryptocurrency designated service providers” — meaning cryptocurrency exchanges and providers of cryptocurrency ‘wallets’ to store cryptocurrencies — in order to trace transactions back to individuals and companies.
The initiative comes as a reaction to an perceived inability of the tax office to trace transactions undertaken by means of cryptocurrency, and could result in a very high number of people being found to have failed to meet their tax obligations.
The biggest potential threat is to those who have held high-performing cryptocurrencies such as Bitcoin, which have seen incredible returns on investment. The money made by investors in Bitcoin may be treated as a capital gain by the ATO, and taxed accordingly.
Thousands of Australians are at risk of receiving a nasty shock from the tax man.
The last thing many people would have been thinking of when buying and selling Bitcoin over the past few years is that the ATO might one day rummage through their online footprint. The veil of secrecy people may have thought they had over their online activity in dark pools could fall away to reveal exactly how people were spending their time — and money — online.
Clarity around the ATO’s treatment of cryptocurrencies as taxable forms of income and investment is welcome. However, the scope of the ATO’s new program and its use of personal information and ability to access those records of online activity will need to be monitored closely before it can be deemed a success.
Those individuals and companies who use cryptocurrencies in their personal or business capacities should consider their legal and tax position and consult legal advice accordingly.