Shining a spotlight on Australian digital currency tax laws

It comes without much surprise that taxation offices around the world are having to keep up with the growing trend of cryptocurrency and the tax implications that follow, writes Janya Eighani.

Digital currency under Australian taxation law is a relatively new concept, and as it gains momentum, it is vital for cryptocurrency traders to keep up with regulations set out by the Australian Taxation Office (ATO).

The situation in Australia

Since the ATO released the Convenient Guidance Paper, the position stands that bitcoin and most cryptocurrencies are a form of property and are taxable.

The ATO recently commented on the taxable nature of bitcoin, saying: “Any financial gains made from the selling of bitcoin will generally be subject to capital gains tax (CGT) and must be reported to the ATO”.

It should be noted that while the Convenient Guidance Paper specifically refers to bitcoin, it is assumed that the rules set out apply to most cryptocurrencies.

In short, the ATO believes that bitcoin, Ethereum and all other cryptocurrencies are a “form of property” and are thus taxable.

According to the ATO, the office will be actively seeking out individuals that attempt to avoid paying tax on crypto profits and has set up a special task force to investigate such matters.

How the ATO plans to identify these individuals, however, is unclear, especially with the introduction of private coins that are often used by our clients for complex and information-sensitive matters, with no intention of avoiding tax or committing an offence.

The ATO currently has access to a range of powers that allow it to investigate “unexplained wealth and conspicuous consumption that may arise through profits derived from cryptocurrency investment”. However, there has been no mention of the ATO using platforms such as Chainalysis to identify crypto tax evaders in Australia, as is currently implemented by the US Internal Revenue Service.

Personal cryptocurrency tax in Australia

Personal use of digital currency is not subject to GST or income tax in Australia. The definition of “personal use” is limited to paying for goods or services using digital currency.

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Source: Shining a spotlight on Australian digital currency tax laws – Lawyers Weekly