Treasury released exposure draft legislation that ensures digital currencies such as Bitcoin are not treated as a foreign currency for income tax purposes.
The proposed change is driven by the uncertainty that has arisen following the decision by El Salvador to adopt Bitcoin as a legal tender.
The changes amend the definition of foreign currency to exclude digital currency (as defined in the GST Act).
Further, the definition of digital currency in the GST Act is modified to ensure it excludes government-issued digital currencies and includes digital currencies that are not government-issued but have been adopted as a legal tender.
If digital currency was treated as a foreign currency, then it would normally be taxed on revenue account regardless of whether it was held for short term gain or as part of a longer-term investment portfolio. This proposed change ensures the taxation of digital currencies depends on the taxpayer’s circumstances.
Read more: Clarifying crypto not taxed as foreign currency | Treasury.gov.au
Contact your Accountant if you have any questions relating to your specific situation.