The Australian Taxation Office (ATO) was invited to present at the Senate inquiry on digital currency, which was started last week by the Senate Economics References Committee (SERC). The inquiry is part of the next stage of formalizing laws around digital currencies in Australia and was approved to proceed by parliament last month.
An 8-page document submitted by the ATO reviews the properties of digital currencies, their impacts and risks, and its draft guidelines on how they should be treated for tax purposes.
Of note is its proposal to consider digital currencies as money, which was spurred by feedback from the community during the comment period. Specifically, differentiation needs to be drawn between “money” and “currency”‘ in the GST Act. The definition of “money” should be broadened to include anything treated like money in a society, and bitcoin “satisfies this ordinary meaning of money because it is widely used and a generally accepted medium of exchange.”
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The document goes on to evoke recent rulings by US courts that effectively treated bitcoin like money, as well as Germany’s recognition of bitcoin as a financial instrument in the form of units of account.
By considering bitcoin as “money,” it would not be considered a good. Therefore, it would not be subject to GST. According to current guidelines, GST is chargeable on bitcoin sales, much to the chagrin of the local community and the reason for CoinJar’s moving shop to the UK.
The consideration would also make bitcoin subject to pay-as-you-go (PAYG) withholding tax when used for wages, as opposed to Fringe Benefits Tax (FBT).