Australia Federal Budget Emphasizes BTC Will Continue to be Treated as a Digital Assets.
As outlined in the first federal budget led by Anthony Albanese, Bitcoin (BTC) will still be treated as a digital asset, and not taxable even like foreign currencies.
Clarification On BTC By Australia Federal Budget
As a result of El Salvador adopting BTC as legal tender last September, the Australian government has essentially ruled out a shift in classification, despite it being used in El Salvador and the Central African Republic as currency.
According to the federal budget released Oct. 25, Bitcoin will be subject to the same tax treatment as other digital currencies, including capital gains tax as an investment.
“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,” cited the budget documents.
The Head of tax at Australian crypto tax accountant, Koinly, Danny Talwar told Cointelegraph that El Salvador’s adoption of Bitcoin has not swayed the Australian Taxation Office (ATO) or Treasury, which have always maintained that Bitcoin should be taxed just 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,” Talwar said.
BTC Investors Will be Under Capital Gains Tax Requirements
Since BTC is a digital asset, investors who profit from selling it are subject to capital gains tax obligations.
In general, profits are included in one’s income tax return. However, if the asset has been held for more than a year, 50% of profits are sent to the ATO.
The general tax rate for profits from foreign currency investments is 23.5%, so classifying BTC in this category would have a substantial discount for investors.
“The Treasury released an exposure draft in September containing proposed legislation to embed this into law,” he said.
However, Talwar noted that not everything is set in stone for digital asset taxation laws, as the Board of Tax is currently reviewing the tax treatment of digital assets more broadly.