The Australian Tax Office (ATO) recently released its long-awaited guidelines on how bitcoin businesses and individual users will be taxed in Australia. The guidelines are similar in nature to those issued by Singapore in January, which received a mixed response from the bitcoin community.
In summary, bitcoins will not be regarded as ‘money’, and will be taxed in a similar way to other non-cash or barter transactions. As in Singapore, this raises the specter of double-taxation for some bitcoin transactions. Likely to be impacted most are businesses who have been transacting in bitcoin and treating it equally to the national currency, the Australian dollar (AUD).
Titled Tax treatment of crypto-currencies in Australia – specifically Bitcoin, the four-page guideline document is a “general in nature” draft version only, and not yet legally binding. The ATO has also not indicated when the rules will begin to apply, or whether (in the case of IRS guidelines in the US) they will be applied retroactively.
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“Transacting with Bitcoin is akin to a barter arrangement, with similar tax consequences”, the paper noted. “The ATO’s view is that Bitcoin is neither money nor a foreign currency, and the supply of Bitcoin is not a financial supply for goods and services tax (GST) purposes. Bitcoin is however an asset for capital gains tax (CGT) purposes.”
Items such as shares, bonds, loans, derivatives and foreign currencies are regarded as ‘money’ or ‘financial supply’ under existing regulations, and are not subject to GST (similar to sales tax or VAT in other jurisdictions).
These definitions are bound to cause some controversy. The bitcoin industry had argued that the broad definition of money could also include bitcoin, and asked for it to be defined as such. Were bitcoin to be defined as ‘money’, ‘foreign currency’ or even ‘financial supply’, exchanging it would not incur GST. This may, however, require legislative change and would likely have wider implications for other forms of non-money units, such as store loyalty points.
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