The federal government’s budget confirms that from 1 July Bitcoin and similar digital currencies will no longer suffer the current ‘double taxation’ burden.
Currently Bitcoin is treated as more like a commodity than a currency for GST purposes, with transactions using the cryptocurrency akin to barter under Australian tax law.
“Consequently, consumers who use digital currencies as payment can effectively bear GST twice: once on the purchase of the digital currency and again on its use in exchange for other goods and services subject to GST,” budget documents state.
Treasurer Scott Morrison last year announced the government planned to change the tax treatment of the currency. Advocates of the digital currency have argued the current situation acts as a fetter on the development of Bitcoin-based business within Australia.
A parliamentary inquiry last year recommended that the government tackle the double taxation issue.
“Removing double taxation on digital currencies will remove an obstacle for the Financial Technology (Fintech) sector to grow in Australia,” budget documents state.
The move will result in a “small but unquantifiable decrease in GST collections and associated payments to the States and Territories over the forward estimates period”.
Although cryptocurrencies remain niche in Australia, distributed ledger technology (DLT) inspired by Bitcoin’s blockchain has generated significant interest among businesses.
The Australian Securities and Investments Commission (ASIC) said earlier this year it expects the range of potential uses of DLT to grow “exponentially” over time.
The corporate regulator has released guidance to aid Australian companies that are considering employing the technology.
The Commonwealth Bank and ASX are two of the most prominent Australian organisations experimenting with DLT, while IBM, Optus and Australia Postearlier this year joined the Australian Digital Currency Commerce Association (ADCCA).