Board of Taxation Review on the tax treatment of digital assets and transactions
Syla, a crypto tax software designed by Australian tax professionals, recently submitted a response to the Board of Taxation's consultation guide for the review of tax treatment of digital assets and transactions. Our submission aimed to provide feedback and recommendations on the current tax issues arising from the crypto economy.
Download Syla's submission to the Board of Taxation
Retail Investors and Crypto Tax Awareness
Our submission highlighted that retail investors often lack knowledge about crypto tax obligations due to the complexity of crypto transactions. This situation has led to a significant reliance on tax practitioners for assistance. However, tax practitioners are also struggling to provide accurate tax advice due to the limited guidance on crypto tax law.
Many of the foreign-based crypto tax software applications that are in use by Australian taxpayers, are not tailored to the Australian market, which can lead to incorrect tax outcomes.
In our submission, we proposed focusing on educational reform, raising awareness about crypto transactions being taxable, and encouraging the use of tax software specifically designed for Australian tax law. By doing so, taxpayers and tax practitioners can have confidence in the tax outcomes calculated by the software and ensure that tax obligations are correctly fulfilled.
Data Sources for Tax Compliance
Taxpayers rely on transaction data from Digital Currency Exchanges (DCEs), blockchains, and wallet providers for tax compliance. However, the quality of data exports from DCEs is often lacking, leading to severe inefficiencies in tax compliance.
Our submission identified several common issues in data exports from DCEs, such as restrictions on accessing historical transaction reports, missing transactions affecting account balances, and limited accuracy in transaction amounts.
To address these issues, we urged for clearer guidelines to be provided to DCEs regarding the data required for tax compliance purposes. Having comprehensive and accurate data would help both taxpayers and tax practitioners accurately report and assess the tax implications of crypto transactions.
Role of Intermediaries in Crypto Tax Administration
Our submission suggested that if DCEs provide complete and reliable data, taxpayers and tax practitioners would be better equipped to comply with tax laws.
Our team proposed a national data standard for crypto transactions to be adopted and used by all DCEs in Australia. This standard would require DCEs to report transaction data in a consistent manner, addressing various inefficiencies and facilitating better tax administration.
Some key attributes of the proposed national data standard include providing complete history of transaction data, accurate reporting on the amounts involved in transactions, consistent date and timestamp reporting, and disclosure of whether Goods and Services Tax (GST) is applicable on a transaction.
Syla's submission emphasised the need for a national shift towards using crypto tax software specifically designed for Australian taxpayers by Australian tax professionals. This would help achieve more accurate and reliable tax outcomes. Additionally, implementing a national data standard for DCEs would enable accurate reporting of crypto transactions and increase taxpayer confidence in tax compliance.
By addressing the challenges faced by retail investors and tax practitioners, Syla envisions a better Australian tax system with greater taxpayer confidence, a more accurate revenue base for tax authorities, and a simpler experience for Australian crypto taxpayers. This proactive approach will ensure that Australia remains at the forefront of tax regulation and compliance in the digital age.