Federal budget 2022: New clarity for bitcoin investors
The federal government will ensure digital currencies such as bitcoin are not treated as foreign currency for tax purposes.
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The federal government will introduce new legislation to clarify that digital currencies such as bitcoin should not treated as foreign currency for tax purposes, removing uncertainty created by a decision by the government of El Salvador to adopt bitcoin as legal tender.
El Salvador in late 2021 became the first nation globally to make bitcoin a legal currency, with President Nayib Bukele announcing ambitious plans for a tax-free “bitcoin city” free of income, property and capital gains taxes.
That move created tax questions for other countries including Australia, and in its budget on Tuesday the federal government said it would maintain the status quo when it comes to the current tax treatment of digital currencies, including the capital gains when they are held as an investment.
The incoming legislation will be backdated to income years that include July 1, 2021, the government said.
“The exclusion does not apply to digital currencies issued by, or under the authority of, a government agency, which continue to be taxed as foreign currency,” the government said in its budget papers on Tuesday.
“This measure is estimated to have no impact on receipts over the four years from 2022–23.”
El Salvador’s move came before this year’s crypto crash, which has spooked investors and seen the prices of major digital currencies including bitcoin and ethereum plummet. Once-hot crypto start-ups like Crypto.com and others have been forced into steep lay-offs and have had their valuations slashed by investors.
About a year after Bitcoin became legal tender in El Salvador, a poll earlier this month showed most people in the country consider the controversial move by President Nayib Bukele as a “failure”.
The poll, by the University of Central America, found that 75.6 per cent of respondents said they never used cryptocurrency in 2022, and 77 per cent consider its adoption 14 months ago as legal tender, alongside the dollar, “to have been a failure.”
The study found that 77 per cent of Salvadorans said their president “should not continue to spend public money to buy bitcoin.”
Bitcoin prices have hovered between $US19,000 and $US20,000 per coin since early September, marking a period of relative stability for what has been an otherwise incredibly volatile asset. It’s still down about 59 per cent in the year to date and down about 72 per cent from its all-time high of $US67,802 it reached in November 2021.
Originally published as Federal budget 2022: New clarity for bitcoin investors
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