Reports said that the first federal budget under the Anthony Albanese led-government has outlined that Bitcoin (BTC) will continue to be treated as a digital asset, and not taxed like a foreign currency.
It has been reported that this clarification comes in response to El Salvador’s adoption of BTC as a legal tender in September last year, with the Australian government essentially ruling out a shift in classification despite it being used as a currency in El Salvador and the Central African Republic.
However, the federal budget was released on October 25 and states that BTC will fall under the “current tax treatment of digital currencies, including the capital gains tax treatment, where they are held as an investment.”
The budget document read:
“This measure removes uncertainty following the decision of the Government of El Salvador to adopt Bitcoin as legal tender and will be backdated to income years that include 1 July 2021.”
Danny Talwar, the Head of Tax at Australian crypto tax accountants Koinly, suggested that El Salvador’s BTC adoption has done little to sway the opinions of the Australian Taxation Office (ATO) and the Treasury, as they have always maintained that Bitcoin should be taxed like other digital assets.
“Foreign currency tax rules in Australia follow revenue-based treatment rather than capital. Since 2014, ATO guidance has stated that crypto assets are not foreign currency for tax purposes, rather they are CGT assets for investors.”
The report said that under the classification of a digital asset, BTC investors will be subject to capital gains tax requirements when making a profit from selling the asset. The percentages vary as profits are generally included as part of one’s income tax with a maximum rate of 45%. If the asset has been held for longer than a year, investors receive a discount of 50% on their tax payable from a capital gains tax event.
Likewise, the general tax rate for profits from foreign currency investing is 23.5% and would mark a hefty discount to investors if BTC were to be classed in this category.
“The Treasury released an exposure draft in September containing proposed legislation to embed this into law.”
Thus, in late September, the Reserve Bank of Australia (RBA) released a white paper outlining a plan for conducting a pilot project for a CBDC called “eAUD” in partnership with the Digital Finance Cooperative Research Centre (DFCRC).