According to a recent report from the Australian Financial Review, the Australia Australian Tax Office is working with a “top team of industry specialists” to learn more about the basics and practicalities of how cryptocurrency and blockchain operate in order to better understand how to go about tracking and taxing gains made through crypto.
A spokesperson for the ATO told the AFR that the effort to build a more concrete legal framework for taxing gains made through cryptocurrencies is also coming from crypto users: “We are consulting with key stakeholders who have expressed an interest in tax issues relating to cryptocurrencies,” to “discuss common queries and scenarios, practical issues and the tax implications for current and anticipated future developments in relation to cryptocurrencies.”
So far, it is known that cryptocurrency is not subject to goods and services tax in Australia. However, cryptocurrencies are legally considered assets, and are therefore subject to Australian capital gains tax.
Regulating Crypto and Tracking Gains is a Tricky Process
Of course, the very nature of most cryptocurrencies is such that they are at least somewhat anonymous; tracking transactions and gains made through cryptocurrency is not necessarily an easy task.
To tackle this issue, the ATO is rumoured to be collaborating with banks. Indeed, Business Insider Australia reported that some Australian bank customers reportedly had their accounts frozen and transfers to cryptocurrency exchanges cancelled.
The ATO isn’t the only Australian government agency which has turned its regulatory focus toward cryptocurrency. ASIC, the Australian Securities and Investments Commission, released a set of guidelines for ICOs in the country. Among other things, the guidelines clarified which kind of ICO could be legally classified as a Managed Investment Scheme (MIS) and subjected to the Corporations Act.
Taxing Crypto is Getting Trendy
The ATO’s efforts reflect a larger global push toward the regulation and taxation of cryptocurrency.
In the United States, the IRS demanded three-year records of 480,000 accounts on the popular Coinbase app; in the end, the app was ordered to turn over 14,000.
However, the ATO’s effort does seem to be more organized than the IRS’s attempts to tax crypto–at least, so far. In the US, there is no specific legal framework for taxing cryptocurrency, and there are not any widespread efforts to create such a structure.
Additionally, there have not been any rumours of government-led initiatives to collaborate with banks specifically, although scattered reports that banks have independently cancelled transfers to cryptocurrency exchanges have appeared here and there.
On the other hand, CNBC recently reported that South Korean cryptocurrency exchanges were raided by police and tax authorities for suspected tax evasion.
In any case, the governments of the world are well aware of one thing: some of their citizens may have made a great deal of money with cryptocurrency. Therefore, governments have a chance to fill their coffers with crypto gains–an opportunity that they are unlikely to pass up.