The Australian Taxation Office (ATO) recently released their “Tax Treatment of Cryptocurrencies in Australia, Specifically Bitcoin” guidelines on Wednesday, August 20, 2014, and the news has received mixed reviews. While some find it good that bitcoin is gaining legitimacy in modern governments, others see it…
While the taxes on businesses operating with bitcoin may be a section that needs some revision, the big picture is a “no capital gains” caveat. Australia just told all of their residents that they can buy up to $10,000 worth of bitcoin, right now, tax-free.
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First and foremost, the ATO does not view bitcoin as a legitimate foreign currency. In the summary section of their announcement, they outlined their views clearly and concisely:
“The ATO’s view is that Bitcoin is neither money nor a foreign currency, and the supply of bitcoin is not a financial supply for goods and services tax (GST) purposes. Bitcoin is, however, an asset for capital gains tax (CGT) purposes.”
At first glance, that may be frightening to those that are vehemently opposed to taxation of any sort. Reading further along though, it’s important to see how exactly it affects two different parties: End-users and businesses.
End-users are simple bitcoin carriers, or a majority of the community. These are the people in Australia spending bitcoin, day-trading, tipping, holding or completing any other normal currency transaction. These tax laws are in no way a hindrance for the everyday end-user.
“Generally, there will be no income tax or GST implications if you are not in business or carrying on an enterprise and you simply pay for goods or services in bitcoin. Where you 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 bitcoin is $10,000 or less.”
The new Australian tax guidelines are a beauty for the end-user, despite what others may say; no GST, no capital gains, nothing. It does require you to keep track of all of your transactions, but now that LibraTax is live that’s easier than ever before.
Businesses; however do feel the effects of these new tax guidelines. Businesses are required to pay the 10% GST tax on bitcoin transactions, twice. The way the guidelines read, businesses in Australia will be hit hard by the GST tax, negating most of the benefits of using bitcoin in the first place.
“You’re an Australian business. You sell a product to an Australian consumer for 1 BTC before GST. You collect 1.1 BTC from them, of which you owe 0.1 BTC to the Government,” he said. “Now you want to convert your 1.1 BTC into dollars. If you sell them for their market value to another Australian, you have to charge GST, so you collect the equivalent of 1.1 BTC in dollars, but now you owe another 0.1 BTC to the Government. Effectively you’ve paid GST twice.”
These tax guidelines are a big problem for bitcoin businesses operating our of Australia, especially in developing industry. With such small knowledge over the true potential of the currency, more and more paperwork is going to deter rather than foster growth.
While these new tax guidelines may be controversial, the ATO is offering comments on how they can adjust the guidelines set in place in their document. They are taking criticism and comments on a change from the Bitcoin community.
If you’re a resident of Australia, or simply want to comment on the tax code, please feel free to do so in our comment section or our CCN forums.
Last modified: January 10, 2020 2:14 PM UTC