After months of back and forth consumers alerts and tax notices, the Australian Tax Office (ATO) has finally confirmed in a guidance report Wednesday that peer-to-peer decentralized digital currencies, like bitcoin and litecoin, are not a form of money or a foreign currency but rather a taxable property.
Bitcoin transactions will be treated similar to barter transactions with the same type of taxation consequences. This means that bitcoin would be treated in the same way as a commodity exchange, which would be subjected to a 10 percent goods and services tax (GST).
“Generally, there will be no income tax or GST implications for individuals if they are not in business or carrying on an enterprise and they pay for goods or services in bitcoin,” the ATO said in its guidance. “Where an individual uses 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 bitcoin is $10,000 or less.”
The tax authority’s guidelines will prompt businesses to include the value of bitcoin transactions as part of their income and will be required to charge GST when supplying bitcoin. Businesses may also be subjected to GST when receiving bitcoin in exchange for goods and services.
Industry experts warn that the ATO’s announcement could prompt the cryptocurrency market to move to more bitcoin-friendly nations, such as Hong Kong and Singapore, because they say it’s a “double GST.”
“This is quite a retrograde step and at odds with the approach taken by other countries,” said Ron Tucker, the chair of the Australian Digital Currency Commerce Association, in an interview with The Australian. “A lot of these businesses have sprung up very quickly and many of them will now look to move offshore.”
The move, which has disappointed the bitcoin community in hoping it would be viewed as a currency, is meant to help bring forward more clarity to tax returns. It’s also a similar move to the Internal Revenue Service’s announcement earlier this year.
