Australians keep onboarding to cryptocurrencies, as the Australian Tax Office estimates that 800,000 Australians have dabbled with crypto in 2021.
Are Australians crypto nuts?
As we have reported several times over the last few weeks, the interest in crypto in Australia has picked up considerably throughout 2021. Not only do an estimated 20% of Australians own cryptocurrencies, but they are also happy to trade crypto. The number of retail traders surged in 2021 by 186%, indicating that Aussies are looking to actively increase their crypto stacks instead of just holding onto them.
Recent data published by the Australian Tax Office added another indicator that Australians might be not-so-secret “crypto nuts,” as the agency reports a 33% increase in the number of cryptocurrency investors in 2021. 800,000 Australians are estimated to have invested in crypto in 2021, up from 600,000 last year. That data matches data from crypto service providers, which collect information about their clients to ensure investors are keeping the books in order.
More investors are good news for the taxman
An ATO spokesman said the increase in crypto investors was likely going to continue in the future but underlined that not all investors were aware of their tax obligations, especially when it comes to NFTs. “The tax treatment of NFTs follows the same principles as cryptocurrencies,” the spokesman said.
Even though the majority of Australians want to pay the correct amount of tax and seek to report their gains and losses correctly, some investors think that the anonymity of crypto provides them with a way of circumventing their legal obligations. The ATO has recently warned about crypto investors’ tax obligations and reminded investors that crypto assets were treated as such and not as currencies. Thus, crypto becomes liable to capital gains tax once the gains exceed $10,000 AUD.
Can crypto and taxes be reconciled?
It’s easy to see why crypto investors would think that dodging taxes was feasible or easy. After all, cryptocurrencies provide a good degree of anonymity, and despite being on public ledgers, wallets are not easy to match with their respective owners.
However, authorities do not have to monitor the entire public ledger but only the entry and exit points to crypto, meaning centralised exchanges and bank accounts that investors use for cashing in and out of crypto. The ATO is already collecting bulk data records from Australian crypto exchanges and comparing the data to the information given on previous tax returns. If information is given incorrectly, investors can be liable to a penalty as high as 75% of the outstanding tax liability.
Therefore, you should think twice about misreporting your crypto gains on your tax records. Although it can be difficult for individual investors to correctly identify taxable events and report the right sums, it is better to err on the side of caution and provide tax authorities with the maximum amount of information. After all, the last thing you want to do as an investor is to make a tidy profit in the markets and hand it right back to the taxman because you misreported it.