Australian Tax Office: Bitcoin Is Not Money

By Hal M. Bundrick Aug 20, 2014 6:30 AM EDT

NEW YORK (InsideBitcoins) — Another government — another interpretation of the taxable implications of bitcoin. The Australian Tax Office (ATO) today issued guidance on the taxation of the popular digital currency, saying it would be levied as a barter or non-cash transaction rather than as a money. Industry reaction has been one of surprise and disappointment.

For individuals who use bitcoin to purchase goods or services for personal use or consumption, any capital gain or loss from disposal of the bitcoin will be disregarded as a personal use asset – provided the cost of the transaction is $10,000 or less. There will be no income tax or GST (goods and services tax) implications for personal transactions using bitcoin. As an investment, the ATO says bitcoin assets will be subject to capital gains tax rules when sold.

Businesses will required to record the value of bitcoin transactions as a part of their ordinary income. They must also charge GST when they supply bitcoin and may be subject to GST when receiving bitcoin in return for goods and services. The ATO says record-keeping requirements are similar to other transactions, including:

  • The date of the transaction
  • The amount in Australian dollars
  • What the transaction was for; and
  • Who the other party was (even if it is just the bitcoin address)

There may be fringe benefit tax consequences for businesses using bitcoin to pay employee salaries.

“The ATO has consulted extensively with bitcoin experts, businesses, industry bodies and other external stakeholders to develop this guidance and explain the obligations of bitcoin users,” said ATO’s senior assistant commissioner Michael Hardy. “People involved in buying or selling bitcoin or other crypto-currencies – whether individuals or businesses – are encouraged to read our guidance. If their circumstances are not covered by the guidance, they can seek a private ruling by contacting us.”

“This is quite a retrograde step and at odds with the approach taken by other countries,” Ron Tucker, chairman of the Australian Digital Currency Commerce Association and a partner at bitcoin exchange BitTrade told Australia’s Business Spectator. “A lot of these businesses have sprung up very quickly and many of them will now look to move offshore.”

“Applying double GST to some bitcoin transactions will adversely affect investment in the bitcoin economy and may push bitcoin businesses to relocate to other, more favourable jurisdictions,” Jason Williams, president of the Bitcoin Association of Australia, told the Sydney Morning Herald.

Matthew Cridland, partner at law firm DLA Piper, took a more tempered view.

“The ATO’s guidance provides an opportunity for interested business to now start lobbying
the Australian Government for amendments to Australia’s tax laws to better deal with bitcoins and
other cryptocurrencies,” he said in a firm statement. “Notwithstanding the ATO’s view, it may be that the tax issues can be managed in such a way that it continues to be commercially advantageous to accept bitcoins.”

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