The federal government has sought to clear up uncertainty about the status of crypto for tax purposes following the adoption of bitcoin as legal tender overseas.
Treasurer Jim Chalmers and Assistant Treasurer Stephen Jones have confirmed that cryptocurrencies will continue to be excluded from foreign currency tax arrangements under the Labor government.
In a joint statement ahead of the end of financial year, Mr Chalmers and Mr Jones said that El Salvador’s adoption of bitcoin as legal tender last year had the potential to create uncertainty about the status of crypto-assets for tax purposes in Australia.
As a result, they said that the Albanese government would move to clarify current arrangements in legislation so that crypto-assets are not regarded as a foreign currency for tax purposes.
“This clarification will deliver a consistent tax requirement for crypto-asset holders and will be backdated to 1 July 2021 for the avoidance of ambiguity following the decision by the Government of El Salvador,” said Mr Chalmers and Mr Jones.
“This gives certainty and clarity at a time of volatility for crypto currencies.”
Crypto has been under pressure since the collapse of the stablecoin TerraUSD last month. Bitcoin sank below US$18,000 ($26,000) last week, the lowest level since 2020.
European Central Bank president Christine Lagarde described crypto-assets as “super risky” and “worth nothing” during an interview in May.
“I’ve said all along that crypto-assets are highly speculative, very risky assets. If you want to invest there, it’s your choice,” she said.
“But what I’m really concerned about when it comes to crypto-assets is that those investments be made by people who have their eyes wide open about the fact that they can lose it all.”
As tax time approaches, ATO assistant commissioner Tim Loh indicated that crypto would be a key focus for the tax office this year.
“Crypto is a popular type of asset and we expect to see more capital gains or capital losses reported in tax returns this year. Remember you can’t offset your crypto losses against your salary and wages” he said.
“Through our data collection processes, we know that many Aussies are buying, selling or exchanging digital coins and assets so it’s important people understand what this means for their tax obligations.”
The Treasurer and Assistant Treasurer stated that the government would continue to take a “pragmatic and timely approach” to its role within the evolving digital currency landscape.
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
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