It’s not often that both academics and students are learning a new suite of information simultaneously. The conditions need to be just right, where a new technology is uncharted, and has immediate and significant implications to a profession being taught at university.
Take cryptocurrency and taxation. Within the period of a standard degree, an entire frontier of information, and interpretation of legislation, needs to be digested and then taught by lecturers. This is real-time learning and teaching at its finest.
Our graduates need to be able to understand tax implications that cryptocurrency investors and blockchain users don’t even realise exist. How can lecturers approach cryptocurrency in their subjects when it evolves at such a rapid pace?
Students need current and relevant material
Dr Elizabeth Morton, Lecturer of Taxation at RMIT University’s School of Accounting, Information Systems and Supply Chain, explains how cryptocurrency has become a critical competency. Dr Morton says, “It is so important now that tax practitioners understand crypto and blockchain technologies because their clients are increasingly engaging in activities in this space.”
Likening it to a can of worms, Dr Morton describes just some of the nuances: “Crypto assets are not cash. They are not money, but they act like it. So taxpayers are not only buying cryptocurrencies as investments, but they can use them to purchase other crypto assets. From a Capital Gains Tax point of view, it essentially doubles the complexity. Not only do you have an acquisition and disposal, but also each time a client transacts with crypto – buying crypto through another crypto – that’s another acquisition as well as a disposal of that original asset.”
Dr Elizabeth Morton
Lecturer of Taxation at RMIT
However, Dr Morton contends this is an exciting time. It is an opportunity to embed forward-thinking learning, bringing this traditional discipline into a new era. Dr Morton is a member of the author team for Australian Taxation, 2nd Edition. She has been developing Technology Boxes throughout the upcoming edition of the textbook about cryptocurrency and blockchain technology. This gives students and teachers the opportunity to link the syllabus with this complex topic and consider the implications during each chapter.
Tax implications are unclear and complex
Tax practitioners have seen a huge increase in taxpayers engaging in crypto activity. Examples of the complexity of activity includes:
- From simple cases: a tax client may have had some fun and bought Bitcoin, Dogecoin or the latest coin craze – are there personal tax implications?
- To the more complex cases: decentralised financial products are available on blockchain – where participants can become liquidity providers contributing to liquidity pools and access ‘flash loans’ with a range of different types of crypto assets. How can we make sense of these complexities for students?
- Then there’s Non-Fungible Tokens (NFTs) that can represent community groups or artwork or even games. Every time someone transacts this way, it could represent a taxable event. But what are the taxable characteristics students need to look for?
- To the fundamental question over the characterisation of the decentralised autonomous organisation (DAO), what are the implications of it being considered a partnership for tax and legal purposes, in contrast with a company structure?
- Let’s not forget taxpayers are not necessarily operating with Australian dollars, and they may not actually physically realise the revenue as Australian dollars either. How does the Australian GST apply?
- In the creative spaces, professional artists who create digital art can now turn that artwork into Non-Fungible Tokens and sell them in marketplaces. Is this a hobby or a business?
Needless to say, the questions could be endless. Legislation is also uncertain in this space and in some instances, reform has been flagged. But in the words of a true educator, this is a teachable moment.
Teaching students to question everything
Dr Morton suggests this is the opportunity to harness a key graduate attribute – critical thinking. She says,
“The beauty of it lies in the fact that cryptocurrency highlights the grey areas in taxation law. In the classroom I like to be able to get students to question their perceptions and assumptions. When a student needs to consider a crypto transaction, they need to ask the right questions.”
Cryptocurrency is the perfect example of the dynamic nature of law. Students and lecturers will need to question what the landscape might look like in a year’s time. How will this look for both the client and the tax practitioner next financial year? Opportunity abounds for students to think critically in this complex space.
Dr Morton reminds us that our students are probably experimenting with it themselves in their personal lives. Seeing both sides of the ‘coin’ could be an advantage for our modern students. Fascinating classroom conversations are just the beginning.
Other graduate attributes such as communication skills and ethical behaviour can also be explored. Students will need to develop:
- A strong ability to communicate with their clients about cryptocurrency
- A good relationship with clients and understanding of their clients’ affairs
- An ability to articulate and apply the law correctly with reasonable care
- An ethical approach, fulfilling a duty to comply with the code of conduct
Career-ready graduates
Our graduates – future tax practitioners – will need to be critical thinkers who can communicate clearly. They will need to understand their clients’ activities and comprehend the technology. Without these, it’s difficult to apply the law accurately.
A textbook that highlights contemporary issues is beneficial to both students and lecturers. The Wiley textbook and e-text Australian Taxation, 2nd Edition by Bevacqua et al helps navigate blockchain technology and cryptocurrency through the journey of the syllabus – embedded in the learning process. With the authorship of Dr Morton, every topic has a matching element that goes into detail relating to crypto. Whether it’s income deductions, administration, ethics, technology itself, or superannuation, there is a story to tell in relation to this new frontier.
Dr Morton acknowledges, “As academics, we certainly need to ensure we are doing enough to help disseminate this knowledge. It doesn’t matter whether cryptocurrency is a fad or not, or whether as lecturers we like it or not, or even agree with it or not. Our students need the fundamentals.” Tax practitioners need to respond to the issues now, and so too will our students in the very near future.
About Elizabeth Morton:
Doctor Elizabeth Morton is a Lecturer of Taxation in the School of Accounting, Information Systems and Supply Chain at RMIT University. Her research traverse both the accounting and taxation systems, with particular concern directed towards blockchain and related technologies, information disclosure and tax compliance. Before academia, Elizabeth worked as an accountant in small business taxation in regional Victoria. She is an author on the second edition of Bevacqua’s Australian Taxation.
More Information:
We hope this post have provided you with some new insights about the relationship between cryptocurrency and taxation law. If you would like to know more about Australian Taxation, 2nd Edition or any of Wiley’s titles, please reach out to your local Wiley Consultant or request a desk copy today.
