The government will change the tax treatment of transactions involving digital currencies such as Bitcoin, Treasurer Scott Morrison announced today.
Currently, the GST treatment of bitcoin involves a form of ‘double taxation’, which bitcoin advocates say acts as a fetter on the growth of local businesses based on the cryptocurrency.
Under guidance issued by the Australian Taxation Office, bitcoin is not treated as a form of currency. Instead, transactions involving bitcoin are treated as a form of barter.
Under ATO guidelines GST should be charged when businesses supply bitcoins and receive bitcoins in return for goods and services.
The report of a parliamentary inquiry into digital currencies recommended a major shakeup of tax laws governing digital currencies, including bitcoin. A key recommendation of the report, released in August, was that the government tackle double taxation issue.
The government’s ‘fintech’ statement, launched today by Morrison, states that the government is “committed to addressing the ‘double taxation’ of digital currencies and will work with the industry on legislative options to reform the law relating to GST as it is applied to digital currencies”.
“We won't be taxing digital currency,” Morrison said today at the statement’s launch.
“Not applying GST to bitcoin and things of that nature, these are the sort of changes that support the transformation and the transition of your economy,” Morrison said.
“Currently, there are more than 600 digital currencies available, with different protocols for transaction processing and confirmation, and with different approaches to the growth in the supply of digital currency units,” the fintech statement says.
“Removing the ‘double taxation’ treatment for GST on digital currencies and applying adequate anti‑money laundering and counter‑terrorism financing rules may facilitate further developments or use in the future.”
The statement also noted the interest in the broader applications of the blockchain, which is the distributed ledger technology that underpins Blockchain and similar digital currencies.
“Blockchain has attracted considerable interest in, and is currently being applied to, a number of areas within the international financial system and may revolutionise key services like international transfers between banks, equities clearing and settlement, and financial contracts,” the statement says.
In January the exchange revealed it had acquired a 5 per cent equity interest in New York-headquartered Digital Asset Holdings, a company that specialises in developing blockchain-style distributed ledgers.
“While it is in the early stages of development, the technology has the potential to radically simplify the way our market operates end‑to‑end, with significant benefits to investors, participants, regulators and government agencies,” the fintech statement says.
The government in February announced the formation of its fintech advisory group.