Crypto exchanges are dobbing you in to the ATO – and it’s already catching people out
Key takeaways
- The ATO can match your crypto transactions with your tax return, even if you only buy and sell small amounts.
- Swapping crypto, spending it, or trading between different coins can trigger a CGT event, even if you never cash out into AUD.
- If you haven't reported your crypto correctly to the ATO, you can amend previous returns. Coming forward voluntarily can help you avoid bigger penalties.
Got crypto? The tax office probably already knows.
Australian crypto exchanges provide data on your transactions to the ATO, says Mathieu Mingant, who's worked at crypto tax platform Summ for 5 years.
"The ATO has had a data matching program for years and obtains transaction data from Australian crypto exchanges," Mingant says.
What does this mean for crypto investors?
The ATO can check your exchange history against your tax return, and it's not just chasing big fish.
Mingant said his own partner got a letter from the ATO after buying $20 of Ethereum a couple of years ago.
"There are a lot of people in this boat, who have bought and sold over the years and they don't even realise it's taxable," he says.
"You don't need to cash out to Aussie dollars to owe tax. If you swap one crypto for another, that's a capital gains tax event. And if you're holding crypto as an investment and use it to buy something, spending it can also trigger a CGT event. So a crypto debit card can create a tax event every time you spend your crypto."
For active traders, that can mean thousands of taxable events in a single year, without ever touching a bank account.
→ Not sure what your crypto tax liabilities could be? Use our crypto tax calculator
What happens if you don't report your crypto activity?
If you miss a lodgement, miscalculate or get the details wrong, you could be hit with a penalty between 25% to 75% of the tax shortfall(plus interest), depending on whether the ATO considers it as a failure to take reasonable care, recklessness or intentional disregard.
Say you underpaid $1,000 in tax on your crypto. You could end up paying a penalty of $250 to $750 (plus interest), on top of the $1000 itself.
At the very extreme end, deliberately evading tax on your crypto can become a serious criminal offence which may carry prison sentences.
But Mingant is quick to separate genuine mistakes from fraud.
"If you don't report your tax income, yes, technically, the ATO would say you've done something that's not legal," he says.
"But it's not as scary as it sounds. The ATO is consistently more lenient with people who voluntarily come forward and say hey, I think I got this wrong. If they have to chase you and you get audited, that's when you can get into a bit of trouble."
If you're a crypto trader thinking: How do I fix this…
The good news is, you can generally go back and fix previous returns, with most individuals having a 2-year amendment period, and longer periods applying in certain circumstances.
Platforms like Summ, which has half a million users, can pull your full trading history from an exchange or wallet (even going back to 2013).
This can help to do the hard part for you: working out what you owe, instead of guessing in a spreadsheet. Right now, you can sign up to Summ via Finder and get a Digital Visa gift card, plus 20% off for Finder members.
Bottom line: exchanges are handing your data to the tax office automatically. If you haven't been reporting your crypto, it's better to sort it out yourself than wait for a letter.
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