Australia: Crypto exchanges must provide personal data of 1.2 million accounts

Source: TaxDAO

The ATO first revealed the crypto asset data matching program in April, which aims to assist in tracking traders who fail to report their cryptocurrency transactions. On May 7, Reuters Australia reported that the Australian Taxation Office (ATO) issued a notice to cryptocurrency exchanges last month, requiring cryptocurrency exchanges to provide personal data and transaction details of up to 1.2 million accounts.

• The ATO promotes tax compliance by using external and internal data to crack down on those who try to evade tax obligations. Ensure that relevant traders comply with capital gains tax obligations for cryptocurrency transactions.

• This move is part of a larger effort to increase scrutiny after the collapse of FTX, including prosecuting illegal token sales and considering issuing new licenses for cryptocurrency exchanges.

• The ATO has expanded its tax supervision scope, reflecting Australia's commitment to adapting regulatory measures to the changing cryptocurrency landscape.

1 Main content

The data matching program targets individuals who evade tax obligations by inaccurately reporting cryptocurrency-related income and strengthening tax compliance in the cryptocurrency industry. It is a comprehensive cryptocurrency tax crackdown launched by the ATO, requiring up to 1.2 million cryptocurrency exchange accounts to provide their personal and transaction data.

The ATO requires cryptocurrency exchanges to provide personal information and transaction details such as the name, address, and birthday of traders. Personal data includes date of birth, phone number, social media accounts, and transaction details such as bank accounts, wallet addresses, and token types to help it audit whether it has complied with the obligation to pay capital gains tax on sales. This data will help identify traders who have not reported their cryptocurrency-related activities, including cryptocurrency exchange activities when selling crypto assets for currency or using crypto assets to pay for goods and services.

In addition, there are some penalties. The ATO will prosecute entities that sell tokens without proper licenses and work with banking partners to prevent payments to cryptocurrency exchanges. In addition, the ATO is currently considering a new licensing framework for cryptocurrency exchanges.

2 Why implement the data matching program?

The complexity of the crypto industry may lead to a lack of real awareness of tax obligations. In addition, the ability to purchase crypto assets using false information may make them attractive to those seeking to evade tax obligations.

The ATO can understand the tax implications and develop appropriate regulatory responses by obtaining relevant data on cryptocurrency transactions. At the same time, the crypto asset data matching program will enable the ATO to more clearly identify and address a variety of tax risks:

• Omitting or incorrectly reporting capital gains tax (CGT) - If crypto assets are purchased as an investment, investors will need to pay tax on any capital gains made when they dispose of cryptocurrencies:

• Selling crypto assets for fiat currency

• Exchanging one crypto asset for another

• Giving away crypto assets

• Trading crypto assets

• Using crypto assets to pay for goods or services

• Omitting or incorrectly reporting income - In certain circumstances, crypto transactions may also give rise to ordinary income. Taxpayers who trade crypto assets or businesses that accept crypto assets as payment are obliged to report the income generated in their tax returns.

• Omission or incorrect reporting of Goods and Services Tax (GST) – In certain circumstances, crypto transactions may incur GST. GST-registered businesses that accept crypto assets as payment must account for their supplies in GST and declare these in their business activity statements. Supplies made by certain crypto intermediaries may be subject to GST and may need to be registered for GST.

• Omission or incorrect reporting of Fringe Benefits Tax (FBT) – When an employee receives crypto assets as remuneration under a salary sacrifice arrangement, the payment of crypto assets is a fringe benefit.

With the increasing popularity of crypto assets in Australia, it is necessary for the ATO to obtain personal information and transaction details of cryptocurrency transactions in order to ensure that tax revenue in the cryptocurrency sector is reduced.

3 Policy Dynamics Evaluation

This policy is part of a strategy to ensure compliance with capital gains tax obligations for cryptocurrency-related transactions. It can promote tax compliance and maintain the integrity of the tax system. At the same time, it can strengthen supervision and management in the cryptocurrency sector and enhance transparency and accountability in the cryptocurrency sector. The ATO's new data matching program directly addresses the issue of underreporting or inaccurate reporting of capital gains tax, income tax, goods and services tax (GST) and fringe benefits tax (FBT) related to cryptocurrency trading.

This policy will provide the ATO with accurate information on the activities of cryptocurrency traders, enabling it to crack down on cryptocurrency traders who attempt to evade taxes, curb tax evasion and ensure a level playing field for all taxpayers.

However, the ATO's strict requirements may cause concern among cryptocurrency investors and exchanges. The need for such extensive data not only raises privacy issues, but also imposes a heavy compliance burden on exchanges. In addition, the possibility of penalties for violations adds another layer of concern to individual traders and platforms; but it also represents Australia's efforts to maintain tax fairness by leveraging data analysis and technological advances.