The first federal budget under the government led by Anthony Albanese has noted that bitcoin (BTC) will continue to be treated as a digital asset, and will not be taxed as a foreign currency.
This clarification comes in response to El Salvador’s adoption of BTC as legal tender in September of last year; the Australian government essentially rules out a change in classification even though it is used as currency in El Salvador and the Central African Republic.
The federal budget was published on October 25 and states that BTC will fall under the “current tax treatment of digital currencies, including the tax treatment of capital gains, when held as an investment.
“This measure eliminates the uncertainty after the decision of the Government of El Salvador to adopt bitcoin as legal tender and will go back to the income exercises that include July 1, 2021”, says the budget document.
Speaking to Cointelegraph, Danny Talwar, head of tax at Australian crypto tax accountancy firm Koinly, suggested that El Salvador’s adoption of BTC has done little to influence the views of the Australian Taxation Office (ATO) and the Treasury, as who have always maintained that bitcoin should be taxed like other digital assets:
“Forex tax rules in Australia follow a treatment based on income and not on capital. Since 2014, ATO guidance has stated that crypto assets are not foreign currency for tax purposes, but rather are CGT assets for investors.”
As such, Under the classification of a digital asset, BTC investors will be subject to capital gains tax requirements when they make a profit from the sale of the asset.
The percentages vary, since profits are usually included in income tax, with a maximum rate of 45%. However, if the asset has been held for more than a year, investors receive a 50% discount on the tax due for a capital gains tax event.
Compared, the general tax rate for foreign exchange investment gains is 23.5%, and it would be a steep discount to investors if BTC were classified in this category.
“The Ministry of Finance published in September a draft with a proposal for legislation to incorporate it into the law,” he added.
However, Talwar noted that not everything is set in stone for digital asset taxation laws, as that a “Tax Board review of the tax treatment of digital assets in general” is ongoing.
As for central bank digital currencies (CBDCs), these kinds of government-backed currencies will fall under “foreign exchange rules.”
Although the prospect of an Australian CBDC seems to be still quite a long way off, progress has been made recent in this area.
By the end of September, The Reserve Bank of Australia (RBA) has released a white paper outlining a plan to conduct a CBDC pilot project dubbed “eAUD” in collaboration with the Digital Finance Cooperative Research Center (DFCRC).
A report on the pilot project is expected to be published in the middle of next year. The RBA will be responsible for the issuance of eAUD, while the DFCRC will oversee the development and installation of the platform.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Keep reading:
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.