Published on the 21/08/2014 | Written by Newsdesk
Bitcoin is neither money nor foreign currency according to the Australian Taxation Office which has issued guidance that may force start-ups and businesses to rethink their Australian plans…
Australia’s fledgling virtual currency sector was disappointed by the ATO’s guidance issued yesterday which indicated payment in Bitcoin would be treated similarly to barter. People buying the virtual currency will have to pay 10 percent goods and services tax when they buy Bitcoin in Australia, and will then be charged a further 10 percent on the goods and services they buy with it.
Bitcoin start-ups and digital currency associations warned that the ruling could drive many virtual currency start-ups offshore or underground.
Ron Tucker, chairman of the Australian Digital Currency Commerce Association, said that he was disappointed in the line that ATO had taken. He said that there was a need for regulators and governments to take a more holistic approach to virtual currencies, and that the guidance would “tie innovation’s hands”.
He also noted that the treatment of the currency was at odds with the situation in the UK, where although a consumption tax was originally applied to Bitcoin it was dropped when it was found to be stifling businesses. He said that the ATO’s decision could, “drive Bitcoin further underground”.
As the managing director of Bitcoin exchange BitTrade Australia, Tucker said he was still weighing his options, but that the company intended to continue “to engage in conversations with our advisors to ensure we can navigate the challenges”.
Many of those challenges will be administrative, with Bitcoin exchanges now having to report to the ATO any sales of Bitcoin, and collect the GST.
There is also paperwork for users of Bitcoin as the ATO’s guidance means that taxpayers filling in their 2013/14 returns will need to ensure they have records detailing the date of any Bitcoin transaction, the amount in Australian dollars, what the transaction was for, and the other party (even if that is just a Bitcoin address). There are capital gains tax implications also – although these are waived for individuals up to a threshold of $AU10,000.
The Bitcoin Association of Australia, which had lobbied the tax office to treat Bitcoin as another form of currency was also dismayed by the decision. BAA president Jason Williams said that: “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.”
Reuben Bramanathan, senior associate at law firm McCullough Robertson, said that the ATO decision would result in a “windfall gain to Commonwealth revenue, which is levied upon innovative Australian startups and technology businesses (using or accepting Bitcoin)”.
“These businesses need incentives and support, and certainly not tax treatment that puts them at a significant disadvantage,” he said.
