The Australian government has reaffirmed its commitment to put an end to the ‘double taxation’ of purchases made by bitcoin and other digital currencies in the country.
Over a year ago in March 2016, the Australian government, through its Treasury, released a comprehensive policy titled “Australia’s FinTech Priorities’ in a marked effort to boost the local financial technology industry. In it, the government pledged to address the ‘double taxation’ of digital currencies.
‘[We] will take action to prevent the double taxation of digital currencies – we won’t be taxing digital currencies,” stated Australian Treasurer Scott Morrison at the time, in no uncertain terms.
Australian consumers are taxed twice during a transaction related to digital currencies, once for the GST (goods and services tax) on the product and again for the GST levied on the digital currency used for the payment.
“If you pay $4 in bitcoin for a coffee, you will pay 40c GST for the coffee, and 40c again for the bitcoin you used to pay for the coffee,” explained Daniel Alexiuc, CEO of Australian bitcoin startup Living Room of Satoshi, speaking to CCN at the time.
This is due to the Australian Tax Office deeming bitcoin as an ‘intangible property’, treating its transactions as barter transactions, rather than acknowledging the cryptocurrency as money or a foreign currency.
Come May 2016, the Government followed up on its pledge to put an end to 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 subjected to GST,’ the government stated in its 2016-17 Budget summary.
A year later, those legislative changes to put an end to the double taxation of bitcoin purchases are yet to occur, leaving Australia’s bitcoin and FinTech industry frustrated.
“[I]t could be put through Parliament very quickly. We’ve been told that it is going through but it needs to be prioritized on the agenda, but it just hasn’t…We’re a bit disappointed with the delay,” stated Danielle Szetho last month, the chief executive of industry lobby group FinTech Australia.
Keeping its Promise
In an official response published last week in response to recommendations by its advisory body, the Australian Government heard that “digital currencies, such as Bitcoin, should be treated as a financial supply for GST purposes.” A legislative change would be required to update the definition of money to include digital currencies, the advisory body stated.
To this, the Government has reiterated its earlier stance, stating in its response:
The Government agrees that consumers should not be subject to the GST twice when using digital currency to purchase goods or services…Any change to the GST treatment of digital currencies is subject to formal state and territory agreement.
CCN has previously reported on the three specific options that the Australian Treasury would consider to prevent the double taxation of digital currencies.
In its document published last week, the Australian Government has also revealed plans toward regulating bitcoin exchanges in the country.
Featured image from Shutterstock.