As crypto gains more and more popularity in Australia with every passing year, people are getting curious about the tax implications of trading digital assets. After all, no one wants to incur the wrath of the ATO.
Jokes aside, the Australian Taxation Office — the government body responsible for collecting taxes — has established clear capital gain tax rules on crypto assets. The big question on many crypto owners’ minds is whether a popular exchange like CoinSpot complies with these tax laws or not.
So, does CoinSpot report to ATO? Join us as we take a closer look at its licence and registration information in Australia to find out.
What is ATO?
As we mentioned earlier, the Australian Taxation Office (ATO) is the primary revenue collection body of the Australian government. It is responsible for collecting taxes including:
- Income tax;
- Fringe benefits tax;
- Goods and services tax;
- Business activity statements;
- Instalment activity statements.
ATO is also just as responsible for collecting taxes from individuals as it is from large corporations.
ATO and cryptocurrency tax
The Australian Taxation Office is also the government entity that creates and enforces tax-related legislation. For crypto investors and exchanges, one of the most significant tax laws is the capital gain tax (CGT).
According to CGT, an increase in the value of your crypto assets will count as gain if you "dispose" of it during that financial year. Disposal refers to an event such as selling, trading, exchanging, gifting, or using cryptocurrency.
For example, say you bought $30,000 worth of Ethereum and it’s worth $45,000 when you sell it back to AUD. This $15,000 profit is a taxable capital gain and you have to include it in your tax report.
What is CoinSpot?
CoinSpot is one of the most well-established cryptocurrency exchanges for Australian digital asset investors. It was established way back in 2013 and has held a solid market share in Australia ever since.
The key reasons behind CoinSpot’s popularity include:
CoinSpot takes a 0.1% fee on every market order which is one of the lowest among any cryptocurrency exchanges that are available in Australia. This might not sound like a major difference from platforms like Swyftx which charges a 0.6% fee, but this small difference will add up quickly with fast, short-term strategies like day trading.
Large asset collection
CoinSpot features an impressive list of 370+ digital currencies for you to trade. These include everything from the most popular assets like Bitcoin and Ethereum to more obscure tokens like Theta and Flow.
Over the years, CoinSpot has garnered a reputation for its reliable service. We can personally attest to this as we’ve never experienced any hiccups when trading on this exchange.
Tax reporting requirements for cryptocurrency exchanges
The primary crypto tax requirements in Australia are under the capital gain tax we discussed earlier. But, to enforce the CGT effectively, ATO has set a few conditions for any exchange looking to operate legally in Australia.
For starters, cryptocurrency exchanges must keep a record of every Australian user and their investments. This data should include information like the legal ID of the user, their transaction history, asset prices at the time of transactions, etc.
Secondly, the exchange must be willing to hand this data over to appropriate government authorities when required. Usually, this authority is the Australian Transaction Reports and Analysis Centre (AUSTRAC) which then hands it over to the Australian Taxation Office.
What ATO Expects
From what we’ve seen, there are two main reasons why ATO enforces these requirements on crypto exchanges operating in Australia. These are:
The Australian Taxation Office uses the records it acquires from crypto exchanges to enforce the capital gain tax on cryptocurrencies and other digital assets. This data helps the tax department cross-examine tax filings and catch individuals that are willingly or accidentally hiding their crypto assets. A few years ago, ATO even directly contacted over 400,000 Australian taxpayers about their overdue capital gain taxes on cryptocurrency assets.
Given the unregulated nature of cryptocurrency, it’s increasingly easy to use crypto for nefarious purposes like money laundering or terrorism financing. The ATO and the Australian government, in general, are able to prevent these acts by keeping an eye on all crypto transactions by Australian citizens.
Does CoinSpot report to ATO?
Considering all the info we were able to gather about CoinSpot’s legality, it’s safe to assume that CoinSpot does report to ATO. We reached this conclusion because CoinSpot has been registered as a legal Digital Currency Exchange (DCE) with the AUSTRAC since 8 May 2018.
Here’s why the DCE registration matters:
DCE-registered cryptocurrency exchanges in Australia are required to operate under a Know Your Customer (KYS) model. In other words, CoinSpot has to verify the legal identity of its users and tie that ID to the on-platform account.
In accordance with the AUSTRAC requirements, CoinSpot records and stores key information about Australian users on its platform. The data gathered in these records contain all the details of a user’s investments over the past fiscal year, including the initial and final values of their investments.
CoinSpot is obliged by law to share the crypto transaction details of their Australian users with the AUSTRAC. This info is then passed on to the ATO which uses it to enforce capital gain taxes. The ATO can also directly request specific data from CoinSpot if the need arises and CoinSpot has to oblige with these requests.
How CoinSpot Feels About This Tax Regulation
We were unable to find any direct statements from CoinSpot regarding Australian taxes or other regulatory requirements like record collection. That said, it won’t be incorrect to say that CoinSpot supports and obliges by these regulations.
We say this because this platform actively helps its users include crypto gains in their taxes. For example, you can easily download a complete CSV file with the record of your crypto transactions over the past 12 months. A tax-management software such as Koinly can then use this file to automatically calculate your capital gain taxes for cryptocurrency.
Alternatively, CoinSpot also offers a live API that lets online third-party tax software gather & process your crypto-related tax more easily.
Implications for Australian cryptocurrency traders
By now, you should have a good understanding of how Australian capital gain tax works on crypto and how platforms like CoinSpot fit into the equation. The only question left is, why does any of this matter?
The Consequences of Not Complying With ATO
On an individual level, failing to include your crypto gains in your tax reports can count as tax fraud. If this happens, you’ll likely have to pay a fine alongside the overdue capital gains taxes. However, the situation can get worse depending on factors like the amount of gain and when you made the crypto investment. In the worst case scenario, you can face up to 10 years imprisonment, plus the fine and remaining taxes.
The consequences for CoinSpot can be even more severe as it can lose the DCE licence with AUSTRAC. This will make it impossible for CoinSpot to operate legally in Australia — practically erasing its Australian market share.
So, make sure to record and report any capital gains from cryptocurrency investments when filing taxes. As long as you’re playing by the federal tax rules, you’re free to invest as much as you want in crypto assets.
To summarise our discoveries, CoinSpot — just like any other legal Digital Asset Exchange in Australia — reports to the ATO. This allows it to ensure that its service is not being used for malicious activities and the platform is legal in the eyes of the Australian government.
That said, the actual process of filing crypto capital gain tax is up to you, and there is no reason for you to avoid it. Just make sure to follow tax regulations if you want long-term success in crypto investment.