The ATO has become aware that some taxpayers think that the anonymity of cryptocurrencies provides a licence to ignore their tax obligations, and are therefore not reporting their cryptocurrency capital gains or losses.

However the ATO is able to closely track where it interacts with the real world through data from banks, financial institutions and online cryptocurrency exchanges to follow the money back to the taxpayer.

ATO assistant commissioner Tim Loh explained that gains from cryptocurrency are similar to gains from other investments, such as shares.

“Generally, as an investor, if you buy, sell, swap for fiat currency, or exchange one cryptocurrency for another, it will be subject to capital gains tax (CGT) and must be reported,” said Mr Loh.

The ATO’s advice is to ensure you keep accurate and detailed transaction records to track your gains and losses.

“If you realise you’ve made a mistake and correct your return, we will significantly reduce penalties. However, failing to report on crypto assets and not taking action when reminded will prompt penalties and potentially an audit,” he said.

Businesses and sole traders paid in cryptocurrency for goods or services, will have these payments taxed as income, based on the value of the cryptocurrency in Australian dollars.

The Tax Office said holding a cryptocurrency for at least 12 months as an investment could entitle you to a CGT discount if you have made a capital gain.