While some governments across the world have been showing their aversion to cryptocurrencies due to their decentralized nature which can contribute to illegal transactions, some have been embracing it.
One particular area that still seems subject to a degree of ambiguity is the tax treatment of cryptocurrency earnings. Given the sizeable profits realized by some early investors, regulatory bodies have been required to quickly adapt their policies. The accuracy and applicability of these, however, continues to be a point of debate among the community.
The Australian government has been taking such initiatives in order to clarify the treatment of cryptocurrencies. They show the local ecosystem’s progressive proactivity. Policies have been implemented that relate to the wider eco-system such as the AUSTRAC requirement that all cryptocurrency exchanges report personal details for each of its individual users.
But these policies overall clearly show the government’s recognition of the potential growth and rising importance of cryptocurrencies. They signal Australia’s intent to be at the forefront of understanding this burgeoning industry
The classification of the cryptocurrencies still remains a problem. There has been much commentary from regulatory bodies about the growth of cryptocurrencies in line with the conclusion of Australia’s last financial year. In order to appropriately tax the asset, however, it required clarification about how to classify cryptocurrencies.
Liz Russell, a senior tax agent at Etax.com.eu said,
“It’s important to know how the ATO classifies cryptocurrency, as this determines how it’s treated for taxation purposes,”
“There is a long-running debate over what cryptocurrency actually is–whether it’s an asset, currency or collectible–but the ATO has made it clear that it treats cryptocurrency as an asset.”