The Australian tax office is now rooting around your Bitcoin draw with a (more official) fine-tooth comb, with the 2022 budget confirming your gains are now officially written into the statutes as taxable.
The Australian Tax office is (presumably) sharpening its axes and whittling its spears now that Labour has revealed it will put the tax treatment of Bitcoin into the tax law. In budget 2022 the Albanese government has confirmed Bitcoin will be taxed as an asset and not as a currency. This comes after El Salvador adopted Bitcoin as a legal currency in 2021.
Though you’ve had to pay capital gains tax on crypto for some time, budget 2022 has made it official.
What is the implication of Bitcoin being taxed as an asset and not a currency? Essentially, investors will have to pay capital gains tax when they sell their crypto assets via an exchange as well as when they trade digital assets for other digital assets (for instance, if you were to trade Bitcoin for Ethereum). If you make a profit, either of these moves will trigger the “capital gain” definition and you will need to pay tax (regardless of whether or not you have ‘cashed out’ to the Aussie dollar).
Of the news, Tim Brunette, co-founder of Australian company CryptoTaxCalculator, told DMARGE: “It’s great to see the government and ATO working in tandem to provide clarity on the taxation of cryptocurrency, especially in a document as visible as the 2022 Budget.”
“The more definitive guidance that can be provided to Australian taxpayers, the higher the likelihood of compliance. At CryptoTaxCalculator, our software is kept updated with new guidelines such as this to ensure our users can do their crypto taxes as painlessly as possible.”
According to the Albanese government’s budget 2022, the usual capital gains tax discount will also apply (to crypto gains) and any government-issued digital currency or central bank digital currency will continue to be taxed as a foreign currency.
According to the AFR, “Central bank digital currencies…are under review by governments, and central banks around the world are examining how programmable fiat currency might be of use in the digital economy.”
“The Reserve Bank of Australia is undergoing a pilot program exploring how an Australian dollar-backed CBDC might be developed and its use cases,” the AFR adds.
Though this is believed to be the first time digital currencies and central bank digital currencies have appeared in Australia’s budget papers, there is still a way to go in Australia (and worldwide) when it comes to cryptocurrency regulation, with the Australian government being yet to share any comprehensive regulations about the sale, development and usage of Web 3 assets.
Treasury has, however, been working on this, with the AFR reporting that “Treasury has strengthened its internal teams working on digital asset research over the past 12 months.”
As for the retail investors, awareness is increasing, but there is still a way to go also.
As Shane Brunette, the other co-founder of CryptoTaxCalculator, told DMARGE in 2021, “Generally there is not a lot of awareness in the market around paying taxes on cryptocurrency.”
“The general theme is that you only pay taxes – maybe – if you cash out for a positive amount than you put in.”
“But actually, when you trade a cryptocurrency for another cryptocurrency, that triggers a capital gain – and you’re expected to keep all your records in your local currency.”
“This means if you’re trading on an overseas exchange, which is actually pretty common, you’ve got to try to work out what the Australian dollar was at the point of sale, and you don’t have any reference prices there. Things like that are catching a lot of users off guard.”
“It’s like stocks – if you traded Apple for Tesla stocks directly you’d be triggering a capital gain and that’s no different to crypto.”
Though not many of us have made any gains in crypto lately, if and when there is another bull market, this official new language around crypto tax law may well come into play for many.
Watch this (digital) space…