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Review of the Tax Treatment of Digital Assets and Transactions in Australia

This submission to the Board of Taxation (Board) is made by the Taxation Committee of the Business Law Section of the Law Council of Australia (the Taxation Committee) and the Charities and Not-For-Profits Committee of the Legal Practice Section of the Law Council of Australia (the Charities Committee).

The key matters the Taxation Committee wishes to bring to the Board’s attention are as follows:

(a) Digital assets, their nature, use, and application are constantly and rapidly evolving. In some cases, the digital assets and digital transactions are fundamentally different to the existing classes of ‘things’ and the presumed structure of transactions in the existing tax law. Given their evolving nature, how the Australian legislative framework is applied—whether existing laws, or the manner in which they are interpreted by the ATO, the courts or taxpayers—may not always be clear or consistent, or be able to provide appropriate tax outcomes.

(b) To date, taxpayers and the ATO have been left to formulate their own positions on how the tax legislation should be applied without adequate policy guidance from Government. The ATO has issued guidance that is general in nature, lacks details, clarity and certainty, and taxpayers are left unclear on how tax laws should apply.

(c) Before there can be any meaningful discussion regarding law design, there needs to be clear policy decisions from Government on emerging digital assets and transactions, and whether and how they should be taxed. Clear policy decisions enable proper consultation and consideration of the legislative approach and decisions on how to best implement policy.

(d) In the short term, the establishment of a law design working group and tax advisory committee consisting of subject matter experts, technology experts, professional bodies, tax professionals, and industry bodies may assist the ATO and/or Treasury in their work, given the pace of change of the technology and the uncertainty regarding the application of existing tax laws. The two could work in conjunction—both at Treasury and ATO level—so that there is less of a time lag, and taxpayers and their advisors have a clear model.

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