The Australian Government Treasury has, in a detailed policy statement pledging support for Fintech to boost the industry, revealed that digital currencies such as Bitcoin will be exempt from double taxation. The policy statement also details how the government plans on regulating companies in the Fintech arena, as well as those in the bitcoin and blockchain space.
In a policy statement released by the Australian Government today, new proposed measures to boost the Fintech sector and establish Australia as a Fintech destination will see the government reduce tax barriers for Fintech investment and curb the existing goods-and-services tax (GST) levied on digital currencies such as Bitcoin.
In an excerpt from the comprehensive policy release titled “Australia’s Fintech Priorities”, a section toward digital currencies and their GST treatment reads:
The Government recognises that that the current treatment of digital currency under GST law means that consumers are ‘double taxed’ when using digital currency to buy anything already subject to GST.
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.
Furthermore, the policy statement from the Australian Government Treasury recognizes that there are over 600 digital currencies around with “different protocols for transaction processing and confirmation.” The statement also revealed its understanding of the fact that they have different approaches to the growth of supply of their digital currency units.
The Treasury further added that “removing the ‘double taxation’ treatment for GST on digital currencies and applying adequate anti-money laundering and counter-terrorism financing rules may facilitate further developments or use [of digital currencies] in the future.”
As reported by the Australian Financial Review, Australian Treasurer Scott Morrison stated:
We will ensure access to concessional tax treatments for venture capital investments in fintech firms, will take action to prevent the double taxation of digital currencies – we won’t be taxing digital currencies.
A Regulatory Sandbox for Fintech & Bitcoin Companies
To ensure innovation is enabled and supported rather than being anchored down by existing rules and regulations, the government also claimed that a ‘regulatory sandbox’ will be established to aid Australian Fintech startups. The statement revealed that the government has been working with the Australian Securities and Investments Commission (ASIC) for the development of the regulatory sandbox.
The policy statement added:
We need a regulatory environment that provides consumers with confidence while not unnecessarily restricting the opportunities for innovation.
A ‘regulatory sandbox’ has the potential to encourage and support the design and delivery of new financial products and services that benefit consumers and businesses. The industry believes that a ‘sandbox’ is a crucial component to assist Australia become a leading market for FinTech innovation in Asia.
In making a market statement about supporting blockchain technology, the “protocol underpinning Bitcoin” as the statement reads, the government is throwing its support behind businesses in the Fintech space who are innovating with blockchain or distributed ledger technology.
The Treasury highlighted the endeavor of the Australian Securities Exchange (ASX) which is seeking to implement blockchain technology as a replacement to its current clearing and settlement system as a post-trade solution.
In a statement included in the release pledging the new policies, the Australian Transaction Reports and Analysis Centre (AUSTRAC) – the country’s anti-money laundering regulator – has also stated that distributed ledger technology brings with it, the potential to “significantly reduce the costs of compliance and regulation imposed on reporting entities.”
Fintech Brings the “Financial System and Economy of the Future”
The country’s Treasurer, Scott Morrison has pledged toward backing Fintech growth and innovation in Australia, comparing Fintech as a transformational technology, like the internet.
In a statement of his own, he revealed:
As Treasurer, I want to help create an environment for Australia’s FinTech sector where it can be both internationally competitive and play a central role in aiding the positive transformation of our economy.
FinTech is going to revolutionise how consumers and businesses, as the drivers of economic activity, interact. This is going to have big implications for demand in the future. We need to be part of these changes and we have got to work out the best way to engage with FinTech and prepare for the financial system and economy of the future.
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