Australia confirms crypto transactions will be subject to capital gains tax
Australia confirmed cryptocurrency transactions would be taxed as an asset and no longer a foreign currency, according to budget papers 2022-23 released on October 25. The existing crypto gains tax discount also applies.
However, the budget papers clarified that any government-issued digital currency or central bank digital currencies (CBDCs) would continue to be taxed as foreign currency.
The tax measures for digital currency tax will see the Australian government introduce legislation to require investors to pay capital gains tax (CGT) on profits they made from selling or trading crypto through a centralized exchange. The decision eliminates uncertainty following the conclusion of the El Salvadorian government to adopt Bitcoin as legal tender, according to the budget papers.
The developing digital currency tax legislation will be backdated to income years, including July 1, 2021.
Crypto gains tax discount.
Currently, the Australian Tax Office (ATO) obligates crypto investors based in Australia to declare capital gains and losses within their Income Tax Return, whereby a 50% CGT discount will be applied if the asset is held for at least 12 months.
In addition, GCT transactions are subject to capital tax when investors sell, gift, or trade a crypto asset, another crypto asset, or fiat currency, convert crypto to fiat currency or spend their crypto asset on goods or services, according to the ATO.
The Reserve Bank of Australia (RBA) is currently testing a pilot to explore the wholesale and retail use cases of e-AUD and how it might be developed. The selected use cases will be announced on December 31, 2022, and the e-AUD pilot to operate the use cases of the CBDC is slated to run from January to April 2023.
Australia’s crypto regulation takes shape.
Australia’s crypto regulatory framework is still in its early stages of development after the Senate released a report that details recommendations for the crypto industry in 2021. These include a CGT regime to define capital gain and losses in crypto transactions clearly, a token mapping exercise to determine the best way to clarify different types of crypto assets, and the establishment of a new decentralized autonomous organization company structure, among other recommendations.
In August 2021, the Treasury announced plans to launch a token mapping exercise, as recommended by the Senate, as one of the first steps toward shaping the regulatory landscape in Australia.
Cynthia is an avid writer who is fascinated by the potential of blockchain tech. She also resonates with Web3 values, especially creative expression and individual autonomy. Since discovering crypto in 2019, she has dedicated her work towards reporting on developments in the blockchain and crypto space.Source