Australia Working on Bitcoin Tax Fix
It has been more than a year since the Australian government committed itself to remedying the nation’s double taxation scheme for cryptocurrencies. The delay in crafting a fix has left some observers wondering whether the issue had been set aside entirely. In a statement released this week, the government has reaffirmed its commitment to addressing the issue.
The double taxation issue is one that has irked many Australians who engage in commercial transactions using Bitcoin and other digital currencies, as the existing policy has left many startups facing two forms of taxation for those activities. Under that policy, Bitcoin has been treated as a barter system instead of a currency, and that’s resulted in some businesses being taxed twice whenever they use digital currencies to purchase goods or services that are already subject to the country’s goods-and-service tax (GST).
In March 2016, the government vowed to work with the cryptocurrency industry to craft a remedy. At the time, Treasurer Scott Morrison went so far as to suggest that the country would alter its laws to ensure that digital currencies no longer face those additional taxes.
This week’s statement from the Treasury acknowledges the government’s support for a recommendation that would address the issue directly:
Digital currencies, such as Bitcoin, should be treated as a financial supply for GST purposes. This would require that the definition of money be updated to include digital currency in both Division 195 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) and relevant GST Regulations.”
The statement declares that, “The Government agrees that consumers should not be subject to the GST twice when using digital currency to purchase goods or services” before explaining the current actions that are being taken to correct the taxation problem:
“For this reason, the Government has already committed, through its Backing Australian FinTech statement, released on 21 March 2016, to address the ‘double taxation’ of digital currencies. The Government is working with the FinTech Advisory Group on options to reform the current GST treatment of digital currencies and released a consultation paper for public consideration as part of the 2016-17 Budget. Any change to the GST treatment of digital currencies is subject to formal state and territory agreement.”