by Mary Swire, Tax-News.com, Hong Kong
05 August 2015
A Senate Committee in Australia has released a new report that recommends that the Australian Tax Office should replace its ruling on the goods and services tax treatment of virtual currencies, such as Bitcoin, with a ruling that treats such currencies in the same manner as traditional currency.
The release of the report follows a lengthy consultation period, including a hearing with industry representatives who warned that Australia faces losing out on financial technology opportunities if the country continues to place an excessive tax burden on virtual currency use, mining, and trading activities. The release of this report had been anticipated much earlier, in March 2015, but will nevertheless be welcomed by the bitcoin industry in Australia and internationally.
The ATO released comprehensive but general guidance on the tax treatment of cryptocurrencies in Australia, and specifically Bitcoin, on August 20, 2014. In its August 2014 notice, the ATO decided that transacting with bitcoins is akin to a barter arrangement, with similar tax consequences. 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, considered to be an asset for capital gains tax (CGT) purposes. This guidance has meant that certain transactions are subject to GST, as explained in detail below, but other transactions are not subject to GST.
The Committee has now proposed that virtual currencies should be broadly outside the scope of GST, which would avoid double taxation, namely by treating such currencies in the same manner as fiat currencies.
The Committee noted that,
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