Crypto-assets are not foreign currency for tax purposes, Government clarifies

By Anthony Bradica and Adam Dimac

The Albanese Government has announced plans to clarify that crypto-assets will not be regarded as a foreign currency for tax purposes.

The announcement comes in response to a decision by the Government of El Salvador in 2021 to allow Bitcoin as legal tender.

The clarification, which will presumably come by way of legislative reform, will apply retrospectively from 1 July 2021 in order to avoid ambiguity following the decision by the Government of El Salvador.

Although the clarification may not be universally popular, it will provide taxpayers with increased certainty, particularly as the Commissioner has not formally updated his view on this issue (found in TD 2014/25) since December 2014.

In the current climate of falling values, taxpayers who are looking to claim a tax deduction for their losses will need to rely on traditional revenue/capital principles to demonstrate that the loss is on revenue account and deductible. This can be difficult to prove to the ATO’s satisfaction, but gathering contemporaneous evidence of your intention in buying, holding and selling the crypto is critically important.


You might be also interested in...

Tax | 20 Jun 2022

Tax losses aren’t dirty laundry – so don’t wash them

Beware of recent messages encouraging ‘opportunities’ to realise losses on CGT assets prior to 30 June in ‘wash sale’ type arrangements.

Tax | 17 Jun 2022

The Carter case: the poisoned chalice of the default beneficiary

The High Court’s recent judgment in Federal Commissioner of Taxation v Carter [2022] HCA 10 is among the most significant this year. We summarise the decision and provide our practical advice.