Chartered Accountants Australia and New Zealand, CPA Australia, Institute of Public Accountants and The Tax Institute (together, the Joint Bodies) write to you as the peak professional accounting and tax practitioner bodies in Australia representing the tax profession.
The Joint Bodies welcome the opportunity to make a submission to the Board of Taxation (Board) in relation to the Review of the Tax Treatment of Digital Assets and Transactions Consultation Guide (Consultation Guide or Review).
‘Digital assets’ is a broad phrase that captures blockchain-based tokens, email accounts, domain names, electronic files and statutorily created carbon emission schemes. We appreciate that a more accurate taxonomy of many of the digital assets considered in our submission may be ‘tokens’. However, we have referred to them by the taxonomy utilised by the Board in the Review for ease of reference and to ensure consistency.
The standards for digital assets are constantly evolving, as are the array of activities possible with those assets. In some ways, digital assets are fundamentally different to the existing classes of ‘things’ in the tax law which are classified as property, currency and equity/debt interests.
Australia’s taxation framework consists of legislative provisions and case law, and is supported by the guidance provided by the Australian Taxation Office (ATO) in respect of its administration. Given the evolving nature of digital assets and transactions, this framework may not always be able to provide the appropriate tax outcomes. The Joint Bodies are of view that a holistic response is required to ensure the best possible outcomes for taxpayers, advisers, and the administration of the revenue.
These challenges are not unique to Australia. A proactive approach to providing certainty of tax treatment may enable Australia to develop a competitive advantage in both the development of digital assets, and attracting investors to both digital assets and the businesses which are actively engaged in digital asset transactions.
The taxation of digital assets and transactions is not well understood by taxpayers or tax practitioners, with current ATO guidance being general in nature and not providing sufficient clarity on many common scenarios. We acknowledge that potential changes to the tax framework surrounding digital assets and transactions is a complex topic which will likely require time to implement. For this reason, we consider that a staged approach should be taken, starting with the high priority and easier to address aspects, and allowing adequate time to deal with broader and longer-term issues.