Andrew Bragg (NSW, Liberal Party) Share this | Link to this | Hansard source

I rise to make some remarks or perhaps to deliver some remarks on the Treasury Laws Amendment (2022 Measures No. 4) Bill 2022. This is a run-of-the-mill Treasury bill which canvasses a number of different issues. I want to talk about schedule 2, which deals with the taxation treatment of digital currency. Digital currency has the potential to reduce costs and improve agency in the economy, and that is why it was a priority of the former government to progress these matters.

On the weekend I read in the papers that people are complaining about the high cost of remittances. That's because the banks have a monopoly over remittances. There is the prospect that new ideas—new technology—could heavily reduce those costs or in fact eliminate those costs if people were able to avail themselves of money transfers using cryptocurrencies or digital-asset-based solutions.

So it is a priority, I would have thought, to regulate this sector. It's a priority not only to deliver new ideas to the economy and lower prices but also to protect consumers, because, for anyone who has taken any time to look at these issues around digital assets and cryptocurrencies, there is a considerable consumer risk here. The longer that these assets are not regulated, the greater the likelihood that people lose their shirts and lose, unnecessarily, their hard-earned money because it's unregulated. There is a massive regulatory arbitrage which exists in Australia today, where you can go into a financial services institution and access a financial product which has to meet thousands of different belts and braces of regulation, but you can go and get access to digital assets and cryptocurrency products and face a regulatory barrier of zero.

The point of all that is that the government have decided that they will not prioritise the regulation of digital assets and cryptocurrencies. These products and ideas would have been regulated in part by now had we won the election. The government, of course, have every right to reprioritise, but every day that there is no cryptoregulation in Australia is another day that people not only miss out on lower prices and new ideas but also are exposed to the market risk of unregulated products. That's what we're talking about here.

As part of a process to junk our policy, the government have decided that they will cherrypick one small idea, which was not recommended by any of our processes. They have decided that they will introduce a measure to change the tax treatment of digital currencies because El Salvador has adopted bitcoin as its legal tender. So, rather than regulate digital assets because we want to see Australians have access to cheaper remittances or because we want to protect Australian consumers, are we just going to cherrypick one random thing adopted by El Salvador and change the tax treatment?

So that's what this bill does. It means that, following El Salvador's decision to use bitcoin, it will not be treated as a foreign currency. It will be treated for tax purposes as, effectively, an asset, and that's what the bill does. The bill also introduces a regulation-making power so that a minister—the Treasurer or the Assistant Treasurer—can make a regulation in this space. We think that cherrypicking this one small element is not the way to go—that there should have been a comprehensive law-reform agenda adopted.

To the government's credit, they have maintained the Board of Taxation's review of these matters. These are complicated matters—I'm not saying that they're easy—but cherrypicking one idea and then making it retrospective is, we think, the wrong approach. In fact, if you go through the Senate committee report and look at all the industry feedback, you will see that the industry does not support this. The industry thinks this is a bad idea, because, in putting the cart before the horse, we end up with more regulatory uncertainty.

Who's to say that this is the right way to go about it? Who's to say that necessarily moving the tax treatment from being a foreign currency to being treated for income purposes is the way to go? We haven't had the benefit of the Board of Taxation report, and the parliament is being asked to consider this issue. So the question then is, 'Why is this being done?'

Minister Jones has been in the job for over a year and he has been in the job whilst there have been collapses of various cryptocurrency organisations and he has not had any regulation he can point to. This is not going to solve that problem. This is just going to resolve a minor tax issue with a country that Australia does very little business with. Treasury in their evidence were not able to sufficiently make the case that it is an integrity issue, because, when Treasury were asked whether this is necessary for revenue purposes and for integrity purposes, their view was that this is 'unquantifiable'.

So this is not going to introduce any new consumer protection. This is not going to improve the capacity of Australians or temporary residents who want to get access to cheaper remittances. It's not going to solve any budget problem. The industry is against this idea. The industry thinks this is cherry-picking something that requires careful judgement. So rushing to this solution—and that is what it does; it forces it out of where it currently is in terms of it being a foreign currency—we don't think is the right way to go.

I want to be efficient here. In conclusion, we will be moving amendments to remove this schedule from the bill, not because we think it's necessarily a terrible idea but because our view is that this is the wrong sequence. We haven't seen what the Board of Taxation are recommending and we don't want to introduce regulatory risk here, given that we are competing for global capital. We do want to allow Australians to avail themselves of these new technologies. This feels like a very old-fashioned way of trying to deal with a dynamic issue in our economy. So I flag in conclusion that we will be moving amendments in the committee stage to remove this bad schedule.

Nick McKim (Tasmania, Australian Greens) Share this | Link to this | Hansard source

The Greens support the Treasury Law Amendment (2022 Measures No. 4) Bill 2022. I particularly want to address schedule 2 of the bill. It's the part of the legislation that Senator Bragg was just speaking about. This schedule seeks to clarify the tax treatment of digital currencies and to maintain the status quo. This is ostensibly in response to the decision that Senator Bragg referred to—the decision by El Salvador to treat bitcoin as legal tender, which would give it foreign currency status in terms of its tax status. As I said, we support the bill, including schedule 2, but this was a pretty close-run thing for us.

We note the submission the Gadens lawyers made to the Senate Economics Legislation Committee inquiry that laid out some of the fundamental issues. They state:

The Bill proceeds on the unreliable assumption that cryptocurrency is a form of property.

They go on to explain:

There is no current Australian statute that anoints cryptocurrency with property status. Accordingly, to be treated as a form of property, the status must derive from common law.

This is a particularly complicated issue, and I think Senator Bragg acknowledged that in the contribution he just made. Because it is a particularly complicated issue it was a good decision that the previous government made—and colleagues know that I'm not one to very often or regularly get up and praise positions of the previous government—when they asked the Board of Taxation to undertake a review of the tax treatment of digital assets and transactions in Australia. That review is due to be completed in September this year. We anticipate that the Senate—and, for that matter, the government—could actually really have benefited from having the review before making decisions in what is a particularly complicated and nuanced policy area and one that has really only arisen over recent years or within the last decade or so. However, we do accept that the government, in proposing this schedule, is seeking to insure itself against the potential that, if bitcoin was to be treated as a foreign currency, investors may make claims for tax losses that could be considerably larger than would otherwise be the case. That is the basis on which we'll be supporting schedule 2 as it stands in this legislation.

I want to acknowledge that schedule 2 is only one part of the bill that is before us. I thank my colleague Senator Shoebridge for his previous contribution in relation to schedule 9, the taxation of military superannuation benefits: reversing the Douglas decision; and also my colleague Senator Rice, who made a contribution with regard to schedule 1, the Digital Games Tax Offset. I refer colleagues to those contributions for a more detailed assessment of those particular provisions. With those comments, I can confirm again that the Greens will be supporting this legislation.

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | Link to this | Hansard source

I thank colleagues for their contributions on this important bill.

Question agreed to.

Bill read a second time.