Home » Australia Won’t Stop Charging Capital Gains Tax on Crypto

Australia Won’t Stop Charging Capital Gains Tax on Crypto

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  • Australian Crypto Business Wanted To Change How Government Approaches Digital Assets
  • Government cites El Salvador’s adoption of fiat currency as fuel for chaos over cryptocurrency tax

In Australia, the newly elected Labor Party maintains a capital gains tax on cryptocurrencies, dashing the hopes of local investors and businesses.

among them 2022-23 Budgetannounced Wednesday by Treasury Secretary Jim Chalmers, said the government aims to introduce legislation to clarify and maintain the status quo.

Local industry insiders hoped the government, elected in May, would change its approach to cryptocurrencies with its latest budget announcement.

But governments are instead focusing on treating cryptocurrencies as investments. “This measure removes the uncertainty following the government of El Salvador’s decision to adopt bitcoin as legal tender, going back to the revenue year that includes July 1, 2021,” the government said.

Only two countries officially recognize Bitcoin as legal tender. El Salvador adopted last year, Central African Republic I did so in April.

Under Australian law, digital assets are considered property and profits made on crypto trading are treated as capital gains events and subject to personal marginal tax rates. Similar to stocks, an investor can get a 50% discount on digital assets if he holds them for more than 12 months.

In any case, if Australia classified cryptocurrencies as foreign currency, investors would not have received many tax breaks. Still, companies could have claimed bitcoin losses on their balance sheets, Maryna Kovalenko, co-founder of crypto accounting firm Kova Tax, told Blockworks in an email.

“Clarification from the Australian government is always welcome, but there are many other areas of the crypto tax that need more attention,” said Kovalenko.

These areas include the tax implications of cross-chain bridges where assets are transferred between chains, as well as income staking and goods and services tax considerations applicable to NFT sales.

Tax System “Buries” Crypto Businesses Across Australia With Paperwork

Businesses and other entities in Australia are required to report turnover, cost of cryptocurrencies sold, and final balance of holdings.

However, much of the cryptocurrency industry relies heavily on interoperability, staking and on-chain products, including NFTs, as part of their operations.

Like Simon Kertonegoro, CEO of Web3 platform MyMetaverse, current tax laws on digital assets remain unacceptable, making it increasingly difficult for local businesses to chart a course forward.

When asked how the current situation will affect the sale of NFTs and digital assets, Kertonegoro said, “If you’re a business that makes hundreds of transactions a day, it’s just going to get buried in the math. The CEO suggested limiting when capital gains events are triggered, except for trades under $100.

It’s especially confusing when trying to determine the amount of taxes, especially when it comes to calculating gas bills.

For example, a business that processes transactions from customers on Ethereum naturally incurs gas charges. While this process is taking place, the price of Ether can theoretically move significantly in either direction.

The business must then calculate how much it has lost or profited from the gas trade compared to the value of Ether when the business first acquired it. “It basically makes it impossible for small businesses to create on-chain products like NFTs,” said Kertonegoro.

However, the government said in its latest budget that capital gains tax does not apply to digital assets issued by government agencies, such as Central Bank Digital Currencies (CBDCs), which are taxed as foreign currency.

Australia’s central bank plans to complete its own CBDC pilot within the next year.

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    Asia News Desk Senior Reporter

    Sebastian Sinclair is Blockworks’ Senior News Reporter in Southeast Asia. He has experience covering not only the crypto market but also specific developments impacting the industry such as regulation, business and M&A. He currently holds no cryptocurrencies. Please contact Sebastian by email. [email protected]

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