In KPMG’s submission to the Board of Taxation’s assessment of the tax remedy of digital property and transactions, the agency made quite a few suggestions in assist of extra regulation within the area.
Alia Lum, companion, tax coverage and regulatory engagement lead at KPMG Australia, stated crypto-assets are in an ongoing state of evolution and you will need to be sure that the tax framework stays applicable.
“KPMG is supportive of extra regulation in Australia to assist investor confidence and supply certainty, which in flip will be sure that Australia retains its competitiveness and talent to draw funding,” Ms Lum stated.
“Particularly, we contemplate that the tax remedy of crypto-assets shouldn’t be left to present strange tax rules. As an alternative, both a particular statutory regime or another statutory framework ought to be legislated to offer readability and guarantee tax outcomes are applicable.”
These new guidelines, Ms Lum believes, ought to be primarily based on the characterisation of digital property, in alignment with the token mapping classification being undertaken by the federal government.
KPMG’s submission added that, as a result of quickly evolving nature of digital property, there ought to be some extent of flexibility for regulators to adapt rapidly. It additionally proposed that “transactions be taxed in alignment with different transactions of a broadly related character”.
“For instance, positive aspects and losses from digital currencies and debt-like property ought to be, by default, on income account, whereas positive aspects and losses from non-fungible tokens (NFTs) and equity-like property ought to be on capital account topic to the intention and enterprise of the taxpayer,” the submission stated.
“These outcomes won’t be commercially or economically applicable in all circumstances or for all taxpayers; therefore, extra guidelines could also be required in restricted conditions to dictate an alternate tax remedy (akin to the managed funding belief (MIT) capital account election) and to permit for adjustments within the character of the token or transaction (akin to rollovers).”
Ms Lum stated that steerage from the Australian Tax Workplace (ATO) has to this point been “inadequate”, which she chalked as much as “uncertainty within the utility of present regulation and an absence of sources on the ATO with the technical experience wanted to maintain up with the quickly altering digital asset economic system”.
“In our view, the reliance on ATO web site steerage will not be conducive to taxpayer compliance and doesn’t give certainty of tax outcomes. Due to this fact, our view is that the ATO have to be sufficiently resourced to have the ability to present additional steerage to taxpayers and tax advisers within the type of binding rulings,” she stated.
“Lastly, as famous above, the evolving nature and excessive diploma of speedy change within the digital asset economic system would require continuous revision to make sure Australia’s tax regime can appropriately accommodate every evolution.
“As such, Treasury, the ATO and the Board of Taxation ought to contemplate establishing a type of ongoing session with taxpayers and tax practitioners in an effort to keep abreast of adjustments as they emerge.”