With over 90 million unique users, Binance is one of the biggest crypto exchanges in the world and is also one of our top recommendations for Australian traders.
Recently, traders have been wondering whether Binance reports its Australian customers' trading activity to the ATO. This is because crypto investors in Australia are required to report any capital gains or losses to the ATO. Failure to do so can result in penalties and fines.
So, does Binance report your trading activity to the ATO in accordance with Australian tax law? Let’s take a closer look to find out.
What is ATO?
ATO (Australian Taxation Office) is the taxation body of the Australian government. It is responsible for enforcing the federal tax system and creating tax-related legislation for both corporations and individuals.
ATO's role in tax collection
In Australia, ATO manages tax collection for various taxes, such as income tax, goods and services tax (GST), excise duty, fringe benefits tax, and more. The ATO also provides guidance & assistance to taxpayers/businesses to help them understand their tax obligations and comply with the relevant tax laws.
ATO and crypto gains
In Australia, crypto assets are treated as investments instead of personal use assets and are taxed based on capital gains at the time of 'disposal'. The events that count as a disposal of a cryptocurrency include selling, gifting, swapping, trading, or using to purchase goods or services.
What is Binance?
Binance is one of the most popular crypto exchanges, and has the highest trading volume in the world. It offers 600+ crypto assets for everyone from large hedge funds to small-scale retail investors. Plus, the fees on Binance are also some of the lowest in the industry, at 0.1% to ensure that you retain most of your gains.
Binance operations in Australia
Binance has been legally operational in Australia ever since its launch in 2017. But at that time, the primary currency of Binance was USD which made it less desirable for Australian traders. To combat this, Binance launched their fiat-to-crypto trading platform in Australia which allowed them to convert AUD directly into crypto assets.
Binance Australia Derivatives also holds an Australian Financial Service license. This way, the trading and lending services by Binance crypto exchange are considered legitimate financial services and are subject to similar tax laws.
Binance is registered with the AUSTRAC (Australian Transaction Reports and Analysis Centre) as well. This allows the exchange to verify the legal identities of Australian traders and record their activities for taxation reporting.
Tax reporting requirements for cryptocurrency exchanges
Crypto exchanges operating in Australia are subject to similar tax reporting requirements as most other businesses. Here’s how these requirements are structured and what ATO expects:
Reporting Requirements for Cryptocurrency Exchanges
Crypto exchanges are required to register for a Goods and Services Tax (GST) and Australian Business Number (ABN). They must also keep records of all transactions and report them to the ATO.
These records should include the date of each transaction and the market value of the crypto asset at the time of the transaction. It should also have the identity of the parties involved i.e. the trader in case of Binance.
Crypto exchanges must also report any capital gains or losses made on crypto trades. This includes gains or losses made when trading between different cryptocurrencies or selling crypto for fiat currency (like Australian dollars).
ATO's Expectations for Cryptocurrency Exchanges
The ATO expects cryptocurrency exchanges to keep accurate records of all transactions and to comply with all tax reporting requirements. Failure to fulfil these requirements can result in penalties or legal action against the exchange.
There is also a lot of pressure on crypto exchanges to ensure that their platform is not used for illegal purposes like money laundering or terrorism financing. This is also why the Australian government or ATO can request a user’s trading history from Binance and they would have to comply.
Does Binance report to ATO?
Considering the information we have on the topic, we conclude that Binance does report to ATO. Here’s why:
Digital currency providers are not allowed to operate in Australia without proper registration. This is why Binance is registered as a legal Digital Currency Exchange (DCE) with the Australian Transaction Reports and Analysis Centre.
The DCE registration with AUSTRAC requires Binance to keep an accurate record of all Australian users. It’s highly likely that Binance keeps track of every crypto transaction and deposition. These records also include information about the user’s capital gain or loss.
The ATO operates a data-matching program with AUSTRAC. In other words, the ATO has all the information it needs to calculate the tax on your crypto assets. So, if you don’t declare your crypto gains on your next obligations, it’s only a matter of time before ATO comes knocking on your door.
This isn’t just speculation either. In recent years, the Australian Taxation Office has contacted over 400,000 crypto holders regarding their assets and overdue taxes.
Judging from their response to regulatory efforts over the years, Binance is in full support of the Australian taxation laws and requirements. The platform is willing to fully comply with regulatory bodies to ensure an optimal experience for its users.
Binance CEO and founder Changpeng Zhao stated, “Before there were clear guidelines for the industry, we have always held Binance to the highest standard to prioritise our users' best interests — a goal that we share with regulators around the world."
This commitment is also evident from the fact that Binance provides step-by-step instructions on how to extract crypto gains and file them in your taxes. It also hosts an API that lets Australian users calculate their crypto tax automatically with third-party services like Koinly.
Implications for Australian cryptocurrency traders
Cryptocurrency is a relatively new technology that blew up in popularity in a short few years. There is a lot of scepticism surrounding cryptocurrency from regulatory bodies over valid concerns like money laundering. By following the data recording and taxation laws set by the ATO, Binance ensures that its users get to use the service without restrictions.
If, for some reason Binance stopped complying with existing regulations, it could face serious authoritative backlash. Worst case scenario, Binacle is forced to leave the Australian market, as it did for the US in 2019. This would have long-lasting ramifications for Australian traders with their investments tied to their Binance account.
At the end of the day, it is your duty to comply with the taxation laws. Make sure to obtain a complete record of your crypto transactions from Binance and include them with your tax report. You also have to calculate the capital gain on your crypto investment based on any disposals you have made in the financial year.
In general, the capital gain tax applies when you:
- Sell a crypto asset;
- Gift a crypto asset;
- Trade, exchange or swap one crypto asset for another;
- Convert a crypto asset to Australian or foreign currency;
- Buy goods or services with a crypto asset.
Failure to do so can lead to extra fines or further legal action for the trader.
To summarise, Binance does report to the ATO. It provides all the necessary trading and transaction information about its Australian users to AUSTRAC which passes it on to the ATO.
This allows Binance to operate legally and obtain an Australian Financial Service license for Finance Australia Derivatives. The ATO uses this data to ensure that Australian traders pay capital gains tax on their crypto assets. For more information, read the ATO site regarding cryptocurrency CGT.