The ATO has started reviewing transaction data to ensure SMSFs who invest in cryptocurrency are complying with their tax obligations.
The ATO has declared it will examine the transactions records for cryptocurrencies held by SMSFs after noting some funds had lost money as a result of holding these types of assets.
In a note to SMSF trustees, the ATO stated its purpose in collecting transaction information from designated cryptocurrency service providers was to match it with taxpayer records to verify the transaction and ensure funds were meeting their tax obligations.
“We’ll then be able to identify SMSF trustees or members who may need help to understand their obligations, so we can provide further advice and guidance of the rules around the tax treatment of crypto-assets,” the ATO stated.
The data matching exercise is being conducted in conjunction with Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Australian Securities and Investment Commission (ASIC), and the ATO stated it considered cryptocurrency and blockchain technology as an enabler of existing risks.
“Cryptocurrency has been used to move funds within the black economy, hide money offshore, and is sometimes linked to risks with unexplained wealth and undeclared taxable capital gains,” the regulator said, adding it was also a high-risk, volatile investment.
“We strongly recommend all trustees undertake their own investigation and appropriate due diligence before investing with any organisation investing super assets into cryptocurrency holdings.”
Commissioner Will Day said the data collected, including that from SMSFs, will be a key element in its compliance program.
“The ATO uses third party data to improve the integrity of the tax system by identifying taxpayers who fail to disclose their income details correctly. We also use third-party data to assist taxpayers in meeting their tax obligations through pre-filling of tax returns,” Day said.