The boom this year in cryptocurrency trading and mining has created a new set of considerations for investors. In some countries cryptocurrency is actually illegal in its entirety. In Australia, it has been legal since 2014 and the ATO has issued tax guidance with a tax lawyer on the subject with evolving depth and complexity since then. Australia has been an area of growth for cryptocurrency operations because Australia was one of the first countries to specifically legalize it. Make sure to trade on the best day trading platform uk. Also, there are already controls on money laundering through cryptocurrency in Australia and exchanges have already been audited by the ATO for information concerning the identities of the holders of various bitcoin accounts. It appears that this early degree of regulation has actually engendered a higher degree of trust in cryptocurrency in Australia than in other jurisdictions where it is entirely unregulated.

At present, the ATO’s official view is that Bitcoin and the cryptocurrencies which operate in a similar way is neither money nor Australian or foreign currency. Rather, it is property and is an asset for capital gains tax (CGT) purposes. However, it is important to note that there is at present very little if any guidance from courts on the subject. In the final analysis, courts interpret the laws laid down by parliament. The ATO can provide interpretive guidance on the law but cannot ‘make law’ in the sense that courts can. It is entirely possible that decisions of the courts in the future could lead to new interpretations of the tax positions of cryptocurrency. The legislation which has been expounded by parliament has also been generic in nature and targeted to the specific circumstances of various groups dealing cryptocurrency.

It is at present uncertain to some degree what the treatment of cryptocurrency might be in terms of income or capital and what deductions might apply in the case of each and the result will most likely depend on the circumstances of the individuals or organizations concerned. Mining operations for cryptocurrency also have attracted interpretive guidance from the ATO but as yet no definitive statement of law from the courts.

We have already accumulated significant experience with the taxation and legal implications of cryptocurrency and would be more than happy to assist you with advice or representation if required. Our lawyers have a deep understanding of the world of cryptocurrency and how regulation applies to it in Australia.

14 April 2018