Federal Budget

“Sorry, Crypto Still Isn’t A Currency”, Says Aussie Federal Budget

Disclaimer This article is for general information purposes only and isn’t intended to be financial product advice. You should always obtain your own independent advice before making any financial decisions. The Chainsaw and its contributors aren’t liable for any decisions based on this content.

The 2022 Australia Budget has officially been announced by the labour government which Treasurer Jim Chalmers has described as “responsible, affordable, and sustainable”, adding that it “provides cost-of-living relief which is responsible, not reckless — to make life easier for Australians, without adding to inflation”.

In addition, the Albanese-led government once again reiterated the Australian government’s position on crypto’s tax status. 

Federal budget highlights

Recognising the current inflationary environment, the budget sought to offer relief to those feeling the pressure of the ever-increasing cost of living. Naturally, as with any budget, compromises were necessary resulting in some sectors benefiting at the expense of others. These are some of the key highlights:

New parents

  • From July 2023 families who earn a household income of less than $530,000 will see their child care subsidy rate increase.
  • Families who earn less than $80,000 will see their total child care subsidy rate lift from 85% to 90%.
  • In addition, for those expecting, Australia’s paid parental leave scheme will increase to 26 weeks or six months by July 2026.

New homebuyers

  • Australians looking to purchase their first property will likely have more options available within their budget as part of a landmark national agreement known as the Housing Accord.
  • Under the agreement, all levels of government along with institutional investors plan to build one million new affordable homes over five years from 2024.
  • The new homes aim to tackle the supply side of Australia’s current unaffordability crisis.

Students

  • Anybody wishing to become certified at TAFE may benefit from the government’s pledge to deliver 480,000 fee-free vocational education places. In addition, the government has pledged to deliver 20,000 additional university places to tackle areas where there are particular skills shortages.

Women

  • Changes to the Fair Work Act will make it easier for women in low-paid sectors to make pay claims, while the budget is spending $20.2 million over four years to set up two new expert panels focusing on pay equity.

What about crypto? 

As per the budget, crypto isn’t a currency, sorry.

Buried within the budget was a reference to digital currencies, clarifying a position previously articulated. Earlier this year, the newly-elected Albanese government offered a statement saying that Bitcoin and other digital currencies were not a ‘foreign currency’ for tax purposes. 

At the time, The Chainsaw dived into this topic with the legal experts at Piper Alderman where taxation specialist Will Fennell described a foreign currency as “one other than Australian currency, and subject to a specific set of rules under the income tax laws”. If you’re keen to understand more about this thorny topic, be sure to check out our article where we got the scoop from the legal eagles.

‘We said it before and we’ll say it again’

In the June 22 joint statement, Treasurer Jim Chalmers recognised that the decision by El Salvador to allow Bitcoin as legal tender had “the potential to create uncertainty about the status of crypto assets such as Bitcoin for tax purposes in Australia”. Continuing further, he added:

“Cryptocurrencies will continue to be excluded from foreign currency tax arrangements under the Albanese Government. The Government will therefore move to clarify current arrangements in legislation that will mean crypto assets will not be regarded as a foreign currency for tax purposes. Capital gains tax will continue to apply to crypto assets that are held as investments.”

Several months later, this has been confirmed in the Australian government’s 2022/2023 federal budget, which clearly states: 

“The Government will introduce legislation to clarify that digital currencies (such as Bitcoin) continue to be excluded from the Australian income tax treatment of foreign currency. This maintains the current tax treatment of digital currencies, including the capital gains tax treatment where they are held as an investment. This measure removes uncertainty following the decision of the Government of El Salvador to adopt Bitcoin as legal tender and will be backdated to income years that include 1 July 2021.”

So there you have it in black and white, crypto will continue to be treated as a capital gains tax asset.

So what does this mean for the ordinary crypto investor?

In practical terms, it means that in most cases, Australians will be required to pay tax on their crypto gains much like if they made a profit on the sale of an investment property or share in a company. For many, this isn’t however surprising as the Australian Tax Office (ATO) has clearly articulated its position in relation to crypto gains, which it has held since 2014. The federal budget merely rubber-stamped that view.

At this stage, it isn’t obvious when the proposed legislation will kick in giving effect to the federal budget announcement – but at the very least, crypto investors have been given advanced notice, and that surely is a good thing.