ATO set to apply GST and capital gains tax to Bitcoin
By Brian Karlovsky on 21 August, 2014
http://www.arnnet.com.au/article/552924
The Australian Tax Office is set to apply GST and capital gains tax to bitcoin
in its first move to tax the digital currency.
The ATO does not deem bitcoin as a currency but has confirmed that bitcoin is a
legitimate asset for CGT purposes, according to the ATO's long awaited guidance
on bitcoin.
"Transacting with bitcoins is akin to a barter arrangement, with similar tax
consequences," the guidance statement said. "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."
This mean GST could apply to both the goods and services being supplied, and to
the ‘supply’ of bitcoins as payment.
Australian Digital Currency Commerce Association chairman, Ronald Tucker, said
it was the beginning, rather than the end of discussions on this issue and that
ADCCA looked forward to a continuing dialogue with the ATO on how to create a
taxation regime that ensured the emerging digital currency industry could
thrive and prosper in Australia. “On the positive front the ATO has confirmed
that bitcoin is a legitimate asset for CGT purposes, and is not some digital
fancy," he said.
"This also means that consumers can confidently purchase goods or services with
bitcoins for personal consumption, with no adverse tax implications up to the
value of $10,000."
He said any goods or services sold in Australia would of course, as expected,
still attract GST just like a transaction conducted in Australian dollars.
"The use of bitcoin to pay for goods or services is no different than
Australian dollars in this respect, other than of course the convenience
provided by digital currency," he said. “The ATO’s paper has, unfortunately,
taken the position to treat the supply of Bitcoins the same way as an exchange
of a commodity; something that would involve the costly and impractical
imposition of GST on the supply of bitcoins."
Tucker said bitcoin by its very nature is used as a currency and a store of
value and we believe it should be treated by the ATO in the same way as other
financial inputs such as foreign exchange. “It is notable that other
jurisdictions with similar tax systems to Australia, such as the UK, have
rejected the view taken by the ATO’s guidance paper, with the purchase of
bitcoins not attracting UK VAT.
He said the digital currency industry in Australia was a hotbed of innovation
and entrepreneurship and had the potential to make the country a regional, if
not global leader in financial services.
“This potential, however, could easily be undermined by an uncompetitive and
unworkable tax regime that sends the industry offshore to other countries such
as Singapore and Hong Kong, where of course Australian GST does not apply.
The ATO’s draft guidance – which is not yet legally binding – is expected to
kick off an extensive round of consultation with the digital currency industry.
--
Cheers,
Stephen
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