The Board of Taxation (the Board) recently commenced its consultation on the taxation of digital assets and transactions. This article briefly explains what crypto assets are and the tax implications that come with them.
Crypto assets are a digital representation of value that users can transfer, store or trade electronically. They are a subset of digital assets that use cryptography to protect digital data and distributed ledger technology (DLT) to record transactions.
Crypto assets can be used as an investment; as a means of exchange; and to access goods and services. Examples of crypto assets include cryptocurrencies (such as bitcoin and litecoin), utility tokens (eg foliecoin), security tokens, as well as non-fungible tokens (NFTs).
Most countries consider virtual currencies to be property income tax purposes, and tax them in the same way as other forms of intangible property. Australia’s tax treatment is consistent with this. In particular, the Australian Taxation Office (ATO) does not consider a bitcoin to be a foreign currency.
The ATO said that bitcoin could constitute a CGT asset. The Treasurer and Assistant Treasurer confirmed that CGT will continue to apply to investments in crypto assets.
In Australia, sales and purchases of digital currency are no subject to GST from 1 July 2017. The GST consequences of using digital currency as a method of payment are the same as the consequences of using money as payment.
An NFT, however, is not a form of digital currency for GST purposes. The GST treatment of an NFT depends on whether the transaction meets the requirements of being either a taxable or GST-free supply.
For FBT purposes, the provision of bitcoins by an employer to an employees in respect of their employment is a property fringe benefit.
Meanwhile, an employer who uses crypto assets to pay salary or wages will be subject to Pay as You Go (PAYG) withholding obligations, and the amount would be assessable as income of the employee.
The information contained on this website and in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website and in this article are of a general nature only and are based on our interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
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