ATO creates specialist task force to tackle cryptocurrency t

Jan 10 2018 at 10:33 AM

ATO creates specialist task force to tackle cryptocurrency tax evasion

The Australian Taxation Office is putting together a taskforce of tax experts, lawyers, technology specialists, bankers and financial advisers to help it identify and track cryptocurrency transactions to ensure all taxes are being paid.

A top team of industry specialists will work with the tax officials to work out strategies for "following the money" involving transactions using the digital "distributed" ledgers that have no central data storage, which make it difficult to trace and track.

The ATO is also believed to be also working closely with banks, Austrac, state revenue offices, which collect revenues, particularly for property transactions, and officials involved with the Black Economy Taskforce, which has been identifying evasion estimated to be worth $30 billion and costing the nation about $2.5 billion in forgone tax revenue a year.

There is also growing concern about cryptocurrency spruikers using inaccurate or misleading information about the income and capital gains tax liabilities to try to cash in on recent buyer mania.

"We are consulting with key stakeholders who have expressed an interest in tax issues relating to cryptocurrencies," a spokesman for the department said.

"We will discuss common queries and scenarios, practical issues and the tax implications for current and anticipated future developments in relation to cryptocurrencies."

It is also intended to "help inform the ATO's strategy for supporting the community in understanding the tax implications of cryptocurrency arrangements they may enter into, including any additional advice and guidance."

The first meeting is expected next month.

'Neither money nor a foreign currency'

The Australian Taxation Office warns bitcoin is "neither money nor a foreign currency".

While it is not subject to goods and services tax (GST), it is an asset that can be used in income and calculating capital gains tax (CGT).

Tax specialists claim they are being asked by clients about liabilities for transactions involving cryptocurrencies, such as bitcoin, where the currency value has soared - or sunk - following the deal.

For example, a property seller receiving $1 million in cash may have to pay tax on the profit at the end of the tax year based on the sale being completed for $1 million.

A seller who receives $1 million in bitcoin that doubles in value from the day the property settlement takes place may have to pay CGT not only on the $1 million property sale, but potentially also on the $1 million gain on the bitcoin if it is later spent or converted to cash.

"The ATO is seeking advice on how they will tackle taxing transactions and identifying liabilities," a senior tax specialist, who did not wish to be named, said.

"It wants industry input on best strategies for investigating transactions involving the currency, finding out who is involved and linking that to a tax return," he said.

Banks, who are deeply sensitive about any suggestion that their systems could inadvertently be used for money laundering following last year's bruising revelations that they provided a safe haven for illegal transactions, are believed to be working closely with authorities.

Customer accounts can be mined by the ATO for transactions involving payments received or made, such as buying property or luxury cars, which can provide a cash trail enabling tax officials to "follow the money".