The Australian Government has announced cryptocurrencies will continue to be excluded from being defined as foreign currency for tax reporting purposes. As the end of the financial year approaches, the taxing of cryptocurrency income has fallen into the 'too hard' basket.
Despite the most popular cryptocurrency, bitcoin, being recognised as legal tender in El Salvador and the Central African Republic, it (and other cryptocurrencies) will not be considered foreign currency in Australia for tax purposes.
Treasurer Jim Chalmers and Assistant Treasurer Stephen Jones, who announced the move, said that El Salvador's decision had the potential to create uncertainty about the status of bitcoin and other digital assets for tax purposes in Australia. The announcement stated:
The government will continue to take a pragmatic and timely approach to its role in the rapidly evolving digital currency landscape.
Following this announcement, the government is expected to move to legislate the current tax arrangements. Interestingly, the legislated changes are expected to take effect retrospectively from 1 July 2021.
This means any cryptocurrency held from this date will not be taxed as foreign currency. Capital Gains Tax will continue to apply to cryptocurrencies and crypto assets which generate a return.