Recently, the Senate Select Committee as a Technology and Financial Centre in Australia delivered its third and final report. The report was formulated after taking evidence from the national businesses, industry groups, academics, and regulators in relation to the regulation of digital assets in Australia.

It suggested 12 recommendations to provide the executive with a “clear regulatory framework for the digital assets sector in Australia”. When talking from the tax practitioners’ perspective, the report states “further clarification on taxation rules for digital assets”.

The recommendation is more focused on the rules around Capital Gains Tax (CGT) for digital assets and cryptocurrency. The CGT regime must be amended so that digital asset transactions only create a CGT event when they result in a definable capital gain or loss. For this, the creation of a new CGT asset or event class may be required to apply for specific concessions or exemptions.

Along with Capital Gains Tax, a concern was raised in front of the Committee regarding the lack of clear guidance from the Australian Tax Office (ATO) about the new applications and emerging technologies.

As per the Senate Committee, the CGT rules need to be updated to enable digital asset transactions to be undertaken with confidence. After this consideration, the Committee came to a conclusion and recommended that the Capital Gains Tax rules be amended in a short time so that all sorts of digital asset transactions only result in a taxable event for CGT purposes.

Not only this, the Senate Committee also indicated that the Australian Tax Office and Treasury might need to proactively work with the digital industry to formulate relevant changes and provide clarity to the industry about the new processes. Businesses in every industry need to be informed and explained every six months when new updates are done to keep pace with new technology developments.

For more guidance on digital assets taxpaying and deductions, feel free to schedule a consultation session with our tax accountants at KPG Taxation.