Tax authorities in Australia plan on collecting AUD$3 billion in fees and fines from taxes on cryptocurrency.
Nobody enjoys paying taxes, and cryptocurrency holders enjoyed a few years of flying under the radar when it came to their investments. However, many countries are now cracking down on those looking to evade paying what is owed from crypto investments. One such country is Australia, and the Australian Taxation Office (ATO) plans on collecting $3 billion (US$2.03 billion) in fees and fines associated with taxes on Bitcoin and other virtual currencies.
No Escaping the Tax Man
The ATO is serious about ferreting out those who are not paying the full amount of crypto taxes owed. The agency announced earlier this year it was spending $1 billion (US$680 million) to hunt down those who are evading their taxes on cryptocurrency investments. Overall, the ATO expects to enjoy a threefold return on their investment.
To track down tax evaders, the ATO is working with cryptocurrency exchanges in Australia as well as global exchanges. The agency will analyze the user data gained from the exchanges and tax returns to see if the numbers add up. Cryptocurrency is taxed as a capital asset in Australia, which means any profit gained from selling Bitcoin or other cryptocurrencies is taxable. Losses can be applied to offset any capital gains.
Interest in cryptocurrencies by Australians has gone up in recent years. The ATO estimates that between 500,000 to 1,000,000 Australians have cryptocurrency investments.
It should be noted that the ATO isn’t going to begin by hammering cryptocurrency investors if a discrepancy is noted. The agency will contact the taxpayer and give them 28 days to verify the information before any compliance action is taken.
Will Day, Deputy Commissioner of the ATO, has said taxpayers can help themselves by being honest, stating:
Where people find that they have made an error or omission in their tax return they should contact the ATO as soon as possible. Penalties may be significantly reduced in circumstances where we are contacted prior to an audit.
Taxes Will Be Paid
Australia is far from the only country looking to collect the full amount of cryptocurrency taxes due. The Internal Revenue Service of the United States is taking an aggressive stance towards collection.
The federal agency sent out letters to cryptocurrency investors a few months ago, saying the person’s tax returns do not match information gleaned from crypto exchanges. The recipients of the letters were directed to a website that explained what actions need to be taken. While pointed, the letters did say that the discrepancy could have been the fault of the exchanges and not the taxpayer.
That letter from the IRS followed an initial wave of letters sent out to cryptocurrency investors. The initial letter came in three different forms: a “soft notice” over a discrepancy that required no action from the taxpayer, a “not so soft notice” that alerted the taxpayer to a “potential misreporting” of cryptocurrency transactions which may see action taken by the IRS, and a “hard notice” in which the IRS alleges noncompliance by the taxpayer in reporting their transactions and that the IRS will likely follow up to determine compliance.
The moral of the fable is to make sure you are accurately reporting your gains and losses from your various cryptocurrency investments. It may take time for the tax authorities to catch up to you if you try to evade paying taxes, but state agencies have proven they’re quite willing to expend the effort to grab every cent of tax money they feel they are owed.
Images courtesy of Pixabay and Flickr/Ken Teegardin.
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