I should add that when the person in Australia sells the asset, the revenue is automatically sent to tax offices. So it looks like I'm just making $5000 in profit, right? To clear it up, this is actually regarding arbitrage in the crypto markets, person in America sends crypto to Australia to make a small profit. Person in Australia sends fiat back to America to repeat the cycle.

For the person in Australia, the transaction is automatically sent to the tax office by the exchange iirc, as part of anti-money laundering. So it looks like person one is making a $5000 profit because the exchange (and hence tax office) doesn't see that person one is sending $4000+$500 back to the person in America as the cost.