Over a year after the Australian government promised to put an end to the double taxation of bitcoin purchases, authorities are yet to formally legislate the changes.
Under still-current rules mandated by the Australian Tax Office, bitcoin is seen as an “intangible” property. By definition then, bitcoin is a money instrument and cannot be a “negotiable instrument.”
Taxing Bitcoin Transactions. Twice.
‘This means that existing laws dictated a double tax on bitcoin, once when exchanging fiat for digital currency, and goods and services tax (GST) applied again when a digital currency is used for settlement,’ the law reads.
‘A transfer of bitcoin from one entity to another is a 'supply' for GST purposes. The exclusion from the definition of supply for supplies of money does not apply to bitcoin because bitcoin is not 'money' for the purposes of the GST Act,’ reads another excerpt from the law, first published in in late 2014.
In March 2016, the Australian Government Treasury published a detailed policy statement, pledging support for the local FinTech system to much attention. Among the list of changes to be enforced was a marked effort to exempt digital currencies, like bitcoin, from double taxation.
In a published policy briefing, aptly named ‘Australia’s FinTech priorities’, the Australian Treasury specifically wrote:
The Government is committed to addressing the ‘double taxation’ of digital currencies and will work with the industry on legislative options to reform the law relating to GST as it is applied to digital currencies.
The government’s Treasury also revealed that it had recognized over 600 digital currencies, each ‘with different protocols for transaction processing and confirmation, and with different approaches to the growth in the supply of digital currency units.’
Speaking to CCN at the time, Daniel Alexiuc, CEO of Living Room oF Satoshi, an Australian bitcoin startup, revealed the damaging effects of the double taxation on the digital currency ecosystem.
The double tax on bitcoin sales meant that it made no financial sense for most Australian business to use bitcoin, since doing so would be 10% more expensive than using cash, credit cards or any other payment option. So it has mostly been only private individuals using bitcoin in Australia up until now.
Come May 2016, the Australian Government pledged to put an end to the double taxation during its budget for 2016-17.
‘The Government has released a consultation paper on changing the GST treatment of digital currencies. This change will ensure that consumers are no longer ‘double taxed’ when using digital currencies to buy goods and services already subject to GST,’ read an excerpt from a summary of the 2016-17 Australian budget. At this point, it was inferred that the government underlined its priority to embrace and encourage the bitcoin and FinTech ecosystem in Australia.
A discussion paper was published during the same month, one outlining the proposed changes in legislation to put an end to the double taxation of digital currencies. That paper received a total of 14 submissions, all in favor of amending the tax law to include digital currencies under the definition of ‘money’.
Over a year has passed since Australian Treasurer Scott Morrison pledged to end the taxation of digital currencies. However, there are no changes in legislations since.
Delays and Frustration
According to industry lobby group FinTech Australia, Australia is taking an “outdated” approach to the taxation of digital currencies, despite traditionally being known as early adopters of technologies.
Speaking to InnovationAus.com, FinTech Australia CEO Danielle Szetho reveals the local FinTech community is increasingly frustrated with the delays of the federal government’s promise to put an end to the double tax. There are growing concerns among the community of the effects of these delays, which have forced some tech companies to move offshore.
Szetho, who reveals that the taxation change was a core reform priority of her lobbying group, is still awaiting that draft legislation to define digital currencies as money under the law.
“It’s one of the original priorities we put in the reform paper and one they said yes to. But here we are, 14 months on and still nothing,” she told the publication.
The frustrations stem from the lack of prioritization of the issue, one which the government is still committed to with its promise.
This is a very technical piece of work which no-one could argue with, and it could be put through Parliament very quickly. We’ve been told that it is going through but it needs to be prioritised on the agenda, but it just hasn’t. They’re working on it but something else just keeps coming up. We’re a bit disappointed with the delay.
Featured image from Shutterstock.