Crypto: a tax labyrinth
Adrian Forza CPA, director of cryptocurrency tax advice firm Crypto Tax Australia, says the crypto ecosystem “doesn’t fit” in the traditional accounting sense.
“You’ve always got your debits and credits, but what you can do with these technologies is very new and hasn’t really been done before,” Forza says.
“In terms of token mapping, the biggest issue is classification and the nuances. There are a lot of situations where these concepts haven’t been explored yet in terms of how they should be taxed.
“A lot of the time accountants are trying to use existing frameworks to apply to crypto, and one tax situation that looks similar might not actually be the same problem.
“Every day there are new ways to interact with cryptocurrency… and that’s just something that accountants will need to deal with,” he explains.
Configuring tax legislation
Elinor Kasapidis, CPA Australia’s head of policy and advocacy, says, “From a tax perspective, we just want to make sure [crypto assets] are treated the same.
“The legislation needs to be designed to fit into the current ways that financial assets are taxed. Where it might differ, we need to have specific legislation to make sure the outcomes are the same.”
Crypto assets can become complicated because the technology and the contracts around them are quite different to what might normally occur, Kasapidis adds.
“There’s a whole data and accounting piece around that, to make sure that investors understand how it needs to be treated for accounting and tax purposes.
“That’s been quite challenging, just because of how these assets work. It’s not quite the same as a contract to sell property or a simple share trade through a stock exchange. There are a lot of novel and diverse ways you can invest in and dispose of financial assets. Many investors may not be familiar with the tax consequences each time they do something.”
Kasapidis points to how the US is effectively leading the crypto charge, with the Securities and Exchange Commission attempting to regulate crypto assets the same way as other financial instruments.
“Australia seems to be taking a ‘steady as she goes’ approach and is looking at what other jurisdictions such as the EU and the US are doing. We would support that, because, ultimately, we want to have consistency and alignment globally in how regulators and investors approach these assets,” Kasapidis explains.
“Other jurisdictions that might be smaller may have an openness to try new ideas. However, countries like Australia will be fitting in more like the US to try to accommodate them into the existing system as much as possible.
“You can see how this industry is growing and regulators are struggling to catch up,” Kasapidis says.
“The next few years will be important for the industry and governments, to make sure they have a handle, and that consumers and investors are protected.”
