Australia removing double taxation on digital currencies

On 11 May 2017, the Australian Government announced that it would treat digital currencies as money for the purpose of the Good and Services Tax (therefore there will be no GST on the purchase or sale of digital currencies). This is good news but not the end of the story as far as tax complications around digital currencies are concerned.

From an income and capital gains tax point of view digital currencies are not considered to be money or foreign currency, they are considered to be property and are taxed as such under the Income tax Assessment Act 1997. Ok so far, but...

One of the issues with this is that the cost base for each transaction needs to be recorded and then any sale needs to be matched against that cost base (on a First-In-First-Out basis). While this is possible, it is cumbersome and complicated, it would be better if digital currencies were treated as a fungible assets like foreign currency, where where it is possible to use the weighted average cost basis for the calculation of gains and losses.

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