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"Today is a watershed day for the digital assets sector" - CEO of Blockchain Australia
Senate proposes regulation to make Australia a cryptocurrency hub
27 October 2021
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2 minute read
A Senate committee recently laid out a well sought after framework of regulations catered towards Australia’s digital assets sector. The proposed plan would equip the Treasury with new powers over exchanges involving cryptocurrencies and other digital assets, under a new type of license. It is increasingly important for accountants to be aware of these proposed changes, as Australians now have access to new choices, lower prices and tax discounts. By setting Australia as a leader in digital assets, it is likely to attract new innovators and developers in the blockchain space, placing an increasing demand on cryptocurrency tax advice.
In response to a rapid rise in the cryptocurrency sector, with almost 18% of Australians owning some form of digital currency, the committee on “Australia as a Technology and Financial Centre'' submitted its third and final report on October 19. This document addresses the main concerns around the lack of regulations surrounding crypto, with 12 recommendations to resolve this issue. If these recommendations are adopted as a bill in parliament, it will send a strong global message that Australia is a safe place for businesses to develop and innovate with certainty and flexibility over blockchain networks.
Decentralised Autonomous Organisations (DAOs)
A remarkable decision from this committee report was the recommendation to formally recognise Decentralised Autonomous Organisations (DAOs) under the Corporations Act. DAOs can be thought of as internet-only businesses that are collectively owned and managed by its members, with internal treasuries which can only be accessed with the group’s authorization. This is important because starting a crypto organisation generally requires funding which means placing trust in people you have only interacted with on the net. As such, DAOs are fundamental to the crypto industry, as they transfer this trust entirely to the DAOs code itself, which is completely transparent and can be verified by anybody.
Providing DAO members with the option of a limited liability company structure will further incentivise talent and investment in the Australian blockchain space. RMIT Blockchain Innovation Hub researcher Aaron Lane claimed that, “If legislated, this will be the most significant reform to corporate law in two decades.”
Change to CGT threshold
The report also pushes back on some calls from crypto investors for capital gains tax to be restricted to ‘on and off ramp’ points, where digital assets are traded for fiat currency. This is due to the pseudonymous nature of cryptocurrencies, where any user can view every transaction any other wallet has made, and each capital gain that has come with it, but this wallet cannot be associated with an individual; that is, unless on and off ramps are restricted.
The report calls for legal amendments so CGT is only applied to digital asset transactions "when there is a clearly definable capital gain or loss" when a trade occurs. No clear threshold was stated.
The report outlines how “this approach may risk leakage of tax revenue in cases where significant crypto-to-crypto transactions are occurring in ways that accrue a clearly definable capital benefit.”
How to manage crypto tax
CryptoTaxCalculator provides accounting grade software for cryptocurrency clients. Our software allows accountants to confidently complete tax returns where the client has traded cryptocurrency. As the ATO increases enforcement in the space, it is becoming more important for accountants to have a solution as part of their full stack. You can sign up here for a free trial of the software today.
