Tackling Crypto-Linked Tax Evasion

The Australian Treasury has invited the public to comment on options for the country’s implementation of the Crypto Asset Reporting Framework (CARF). In a consultation paper released Nov. 21, the Treasury said its implementation of CARF, developed by the Organization for Economic Cooperation and Development (OECD), “would complement the government’s efforts to strengthen tax transparency.”

The paper will explore the policy merits of adopting the OECD model into domestic tax law and consider an implementation timeline that minimizes compliance costs. The rapid growth of cryptocurrency markets is said to have presented challenges for governments in terms of tax evasion and avoidance.

To address this issue, the OECD developed CARF, which aims to improve international tax transparency by ensuring that crypto-related information is reported in a standardized manner. The framework is expected to enhance OECD countries’ ability to monitor and tax crypto-related activities, thereby reducing opportunities for tax evasion and avoidance.

CARF will require crypto intermediaries, such as exchanges and wallet providers, to report specific crypto transactions to tax authorities. This includes information on the sale or purchase of crypto assets. As explained in the consultation paper, Australia expects CARF reporting to commence sometime in 2026.

“Subject to a final decision of Government, it is envisaged that CARF reporting requirements would commence from 2026, to ensure the first exchanges between the ATO and other tax authorities could take place by 2027. This timeframe would also be subject to future legislative priorities. This timeframe is intended to provide adequate lead time for reporting crypto asset service providers and intermediaries to update their systems,” the Aussie Treasury said.

The Australian Taxation Office (ATO) is expected to consult with the public on the specific format for reporting crypto asset transactions, likely using an XML schema.

However, implementing CARF will require Australia to amend its tax legislation and make changes to existing Common Reporting Standard (CRS) rules, the consultation paper said.
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