Digital Government News

Australian Tax Office puts crypto under ‘hit list’ for tax scrutiny

Eliza Sayon May 17, 2022

2 min read

While neither of the major parties has committed to accelerating cryptocurrency reforms despite the most recent crash, the Australian Tax Office claims that it has the crypto sector on its ‘hit list’.

“Government can’t guarantee your crypto any more than it can guarantee a painting or a share in a company, and nor should it,” a coalition spokesperson said.

“But we can make sure Australian exchanges, custodians and brokers – Australian players in the crypto ecosystem – work within a regulatory framework that is better, safer and more secure.”

The market watchdog’s current reach only applies to crypto-asset investment products that fit within the legal framework for financial products and services, and the jury is out on whether cryptocurrencies are “assets”.

The digital asset economy has already grown to $2.1 billion and, with the right regulatory settings, could be as large as $68.4 billion by 2030.

But as market economist Stephen Koukoulas tweeted, one Bitcoin is still worth one Bitcoin.

Treasury issued a consultation paper in March on a regulatory model with new obligations on firms that provide access to crypto-assets and custodial services, but work has paused during the election campaign.

In the meantime, punters and providers must rely on Australian Securities and Investments Commission guidance that describes when and how crypto-assets fit within financial services laws and how regulations may apply to blockchain technology

ASIC Commissioner Cathie Armour warned at a cryptocurrency summit last month about the rise of the small investor during the pandemic and an increase in scams.

Australians lost $99 million to crypto-asset scams in 2021 alone, and that’s just what was reported.

ASIC also hears from Australians who have been caught out on unlicensed 24-hour crypto trading platforms.

“Some people experienced significant losses due to excessive leverage, platform outages, or unfair liquidations,” she said.

Fitch Ratings agency expects increased calls for regulation, particularly of so-called stable coins such as Terra, that are designed to be pegged to the US dollar and play an important stabilising role.

Last week’s failure of Terra’s peg sent shock waves through the decentralised finance sector, which led to further liquidations, and bouts of volatility would continue, Fitch said.

But the limited links with regulated financial markets mean crypto volatility is unlikely to spill over and cause wider financial instability or damage to the real economy.

The coalition says it wants to make sure that consumers can trust the exchanges they use to buy crypto, which is why it plans to introduce licensing and custody requirements.

“This will be a uniquely Australian stamp of quality,” the spokesperson said.

“These two changes will make it better, safer and more secure for Australian consumers to invest in crypto.”

Meanwhile, the Australian Tax Office has warned that crypto assets are on its “hit list” for tax time 2022, with more than 800,000 Australians tracked and linked to transactions.

“We know that many Aussies are buying, selling or exchanging digital coins and assets, so it’s important people understand what this means for their tax obligations,” Assistant Commissioner Tim Loh said in a statement on Monday.

If Australians dispose of a crypto asset, including any dumped in the recent panic selling, it needs to be recorded in tax returns for this financial year.

“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year,” Assistant Commissioner Loh said.

“Remember you can’t offset your crypto losses against your salary and wages.”

With AAP

Eliza Sayon

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Eliza is a content producer and editor at Public Spectrum. She is an experienced writer on topics related to the government and to the public, as well as stories that uplift and improve the community.