Australia Won’t Stop Charging Capital Gains Tax on Crypto
- Australian crypto firms had hoped the government would change its approach to digital assets
- Government cited El Salvador’s adoption of legal tender as source of confusion over crypto taxes
In Australia, the newly elected Labor Party will keep the capital gains tax on crypto in place, dashing the hopes of local investors and businesses.
In his Budget 2022-23announced by Treasurer Jim Chalmers on Wednesday, the government said it aimed to introduce legislation that would clarify and maintain the status quo.
Local industry participants had hoped the government – elected in May – would change its approach to crypto in its latest budget announcement.
But the government has instead doubled down on its efforts to treat cryptocurrencies as investments. “This measure removes uncertainty following the decision of the government of El Salvador to adopt Bitcoin as legal tender and will be backdated to the years of revenue that include July 1, 2021,” the government said.
Only two countries formally recognize bitcoin as legal tender: El Salvador adopted it last year and Central African Republic did it in April.
Under Australian law, digital assets are considered property and profits made on crypto transactions are treated as capital gains events, subject to an individual’s marginal tax rate. Similar to stocks, an investor can get a 50% discount when holding a digital asset for more than 12 months.
In any case, investors would not have received a big tax break if Australia classified crypto as a foreign currency. Still, companies may have been able to claim bitcoin losses on their balance sheets, Maryna Kovalenko, co-founder of crypto accounting firm Kova Tax, told Blockworks in an email.
“Clarity from the Australian government is always welcome, however, there are many other areas of crypto tax that deserve greater attention,” Kovalenko said.
These areas include the tax implications for cross-chain bridging, where assets are transferred from one chain to another, as well as the timing of revenue staking and the consideration of goods and services tax such as it applies to the sale of NFT.
Tax scheme ‘burying’ crypto businesses across Australia in red tape
Businesses and other entities in Australia are required to report sales, cost of crypto sold, and closing balances of assets held.
But many in the crypto space rely heavily on interoperability, staking, and on-chain products including NFTs as part of their operations.
For some, like Simon Kertonegoro, CEO of Web3 platform MyMetaverse, current tax laws on digital assets remain untenable, with local businesses finding it increasingly difficult to chart the way forward.
“If you’re a business doing hundreds of transactions a day, you’re just buried in calculations,” Kertonegoro said when asked about the impact of the current situation on NFTs and asset sales. digital. The CEO suggested a cap on triggering a capital gains event, excluding trades below $100.
It gets especially confusing when it comes to determining how much tax is owed, especially when it comes to calculating gas costs, he said.
A business processing a customer’s transaction on Ethereum, for example, would naturally incur gas fees. In the process, the price of Ether could, theoretically, move significantly in either direction.
The company would then have to determine how much it lost or gained from the gas transaction compared to the value of the ether when it was acquired. “This basically makes it impossible for small businesses to create blockchain products like NFTs,” Kertonegoro said.
In its latest budget, however, the government said capital gains tax would not apply to digital assets issued by a government agency, such as central bank digital currencies (CBDCs), which will be taxed. like foreign currency.
Australia’s central bank is expected to complete its own CBDC pilot project within the next year.
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