Given its reputation for security and versatility, KuCoin has garnered quite a user base worldwide, and Australia is no different.
But — unlike Germany, Singapore, or Malaysia — the Australian tax system treats crypto like an investment. Australian KuCoin users have to pay capital gains tax on their digital assets. Not only that, but the Australian Taxation Office (ATO) also has certain requirements for crypto exchanges if they want to legally operate in Australia.
Does KuCoin follow these requirements and report to the ATO? Let’s analyse the details of KuCoin’s operation in Australia to find out.
What is ATO?
To put it simply, ATO is the taxation department of the Australian government. It is responsible for collecting taxes from individual citizens, small businesses, and mega corporations operating in Australia.
ATO’s Rules Regarding Cryptocurrency Assets
As we mentioned earlier, the Australian Taxation Office labels crypto assets as an investment and is subject to capital gains tax (CGT) laws. That said, the CGT does not apply to all of your digital investments at all times. Instead, this tax is only applicable for an asset when a CGT event is triggered. This happens when you:
- Buy goods or services with your crypto asset;
- Trade one crypto asset for another;
- Convert a crypto asset to Australian Dollar or foreign currency;
- Sell your crypto asset;
- Gift your crypto asset to someone else.
To calculate the taxable amount, simply subtract the initial purchasing value from the value at the time of a CGT event. For example, let’s say you invested $10,000 in Ethereum a few months ago and you now sell it for $17,000. In this situation, the taxable “gain” is $7,000. You can use our profit/loss calculator or crypto tax calculator to help you work out your tax obligations this financial year.
What is KuCoin?
If we sort by trading volume, KuCoin is the fourth largest digital currency exchange in the world. From our experience with KuCoin, there are three key features that make this exchange a desirable option for digital currency investors. These include:
Large Lineup of Crypto Assets
KuCoin allows you to invest in over 700 unique crypto assets. These include everything from well-known coins like BTC and ETH to the latest hot tokens like hiBEANZ or HALO.
Super Low Trading Fees
The initial maker/taker fee on KuCoin is just 0.1%/0.1% which gets lower as you increase your trading volume. You will also get an instant 20% discount if you pay fees with KuCoin’s own KCS token.
Open Yet Safe Platform
KuCoin is an open exchange that does not require you to verify your government-issued ID in any country. Despite its open nature, KuCoin still promises exceptional security with assets stored in a Singapore-based crypto asset security platform, Onchain Custodian.
KuCoin in Australia
Australian investors can use KuCoin without any hiccups. It even added the ability to purchase digital assets with AUD using the Simplex platform in early 2020.
That said, KuCoin exchange does not have a Digital Currency Exchange (DCE) licence from the Australian Transaction Reports and Analysis Centre (AUSTRAC).
Tax reporting requirements for cryptocurrency exchanges
Crypto exchanges that are legally registered in Australia with an AUSTRAC licence have certain obligations that they must follow. Non-compliance with these obligations can lead to fines, legal action, or even a cancelled AUSTRAC licence. The most noteworthy of these requirements are:
Exchanges must require an ID verification from their Australian users before they’re allowed to invest anything on the platform. The authentication of Australian IDs is usually done by the AUSTRAC.
Every licenced digital currency exchange must keep a complete record of Australian users. These records must contain the following information:
- Identification of the account’s owner;
- Complete transaction history with the purchase price of every crypto asset;
- Details of the CGT event like an asset swap.
Lastly, the exchange must be willing to share these records with AUSTRAC, ATO, or any other relevant Australian government body.
Why These Requirements Exist
From what we’ve seen, the ATO has established these requirements for the following key expectations:
Having detailed data about the crypto investments of Australian citizens ensures that no one can deliberately hide their digital assets to avoid taxes.
Financial Crime Prevention
Cryptocurrencies are one of the easiest modern methods of committing financial crimes like laundering money or financing terrorism. The record kept by crypto exchanges makes it easier for Australian law enforcement to find the culprits and prevent these crimes.
Does KuCoin report to ATO?
After going through KuCoin’s operations around the world and in Australia, we conclude that it does not report to ATO. As we mentioned earlier, KuCoin does not have a Digital Currency Exchange licence from AUSTRAC which is necessary to provide digital financial services in Australia legally.
KuCoin also does not report to the IRS (the equivalent of the ATO, in the United States). In fact, the Seychelles-based crypto trading platform is completely open and is not regulated by any government body around the world.
Is KuCoin Illegal?
Not necessarily. Investing in crypto using KuCoin is not illegal for Australian citizens. They can even purchase crypto with AUD using their credit/debit cards.
We believe that there are three main reasons why it’s operational in Australia. These include:
AML & CFT
While KuCoin doesn’t report to ATO directly, it is willing to help with any Anti-Money Laundering and Counter-Terrorism Financing efforts. It’s highly likely that KuCoin would have been completely banned from Australia if it did not have this AML & CFT policy.
Complying With Law Enforcement Requests
KuCoin also complies completely with any law enforcement requests from around the world which include the Australian Taxation Office. The ATO can simply request the relevant record if it suspects an Australian citizen of hiding their crypto capital gains on KuCoin.
KuCoin provides easy CSV transaction history downloads and an API for third-party tax-calculation software like Koinly. This makes it easy for its Australian users to include the info about their digital assets in their tax filings.
KuCoin even has a complete guide page on how to file crypto taxes with specific instructions for Australian taxpayers.
Implications for Australian cryptocurrency traders
The fact that KuCoin isn’t registered with AUSTRAC has nothing to do with your taxes. You still have to accurately represent your profit from digital currency investment and pay taxes for it.
Some believe that they can avoid crypto taxes if they invest their crypto on KuCoin, which is simply not true. The ATO can still notice the discrepancy in expenditure and taxes during an audit. Plus, they can simply request the transaction history from KuCoin and there is a good chance that the exchange will comply.
Consequences of Hiding Crypto Assets
Trying to hide your crypto investments from the ATO is plain tax fraud and carries serious ramifications for the taxpayer. Punishments include:
- Fines up to $13,320;
- A fine worth 75% of the shortfall;
- Anywhere between 12 months to 10 years in prison.
KuCoin’s Future in Australia
Speaking from experience, the future of KuCoin in the Australian market is relatively stable. Unless an unexpected legislation bans all non-registered DCE platforms, your investment is likely safe with KuCoin.
That said, if you’re not comfortable putting your hard-earned money into an unregulated platform, that’s fine as well. There are plenty of platforms that have a legal DCE licence from AUSTRAC, namely Binance, CoinSpot, and Swyftx, who all report to the ATO.
To summarise, KuCoin does not report to ATO or any other regulatory body for that matter. However, this does not mean that it is unsafe or somehow outside the law. It’s still willing to comply with law enforcement requests, hand over data, and freeze accounts suspected of financial crimes.
As for the CGT situation, there is no excuse for you to avoid it. KuCoin provides all the documentation you need to include your crypto investment in your tax reports. Ensure your reports match up with your crypto transaction history to avoid any future trouble from the ATO.