In effect, what is happening is the user will be charged a 10% GST when purchasing Bitcoin from an exchange. Then when the same user goes to The Living Room of Satoshi or another Bitcoin and Cryptocurrency related business they are charged a 10% GST yet again. This situation has led to The Living Room of Satoshi shuttering its business as the new Australian regulation makes the company’s service non-viable due to the double taxation.
Here is a pertinent quote from https://nogst.club/ that illustrates how chilling regulation can be:
No Double GST For Bitcoin
The ATO released some guidance that may require GST to be charged when buying bitcoin from a bitcoin exchange* (even when buying for personal use).
* An exchange marketplace (buying from other bitcoin users) may only have to charge GST on their fee (not the amount of bitcoin) whereas exchanges like CoinJar may have to charge GST based on the total amount of bitcoin.
What it means is you may have to pay 10% GST to buy bitcoin from a non-marketplace exchange, then another 10% GST when you buy a product or service in Australia. That’s double GST, and that is unfair to bitcoin users and the industry.
In response to this double taxation, Living Room of Satoshi (a service that allows people to pay their bills with Bitcoin) is suspending all operations. This information was revealed via announcement earlier today:
Important notice to our customers
Living Room of Satoshi has suspended all operations.
It is extremely disappointing, but we are one of the young and innovative companies that has been hurt by the ATO’s recent GST ruling on bitcoin. This ruling makes it economically infeasible for any Australian-based business to use bitcoin as the currency that it was designed to be.
We’d like to thank everyone who has supported us; we know that many of you have come to rely on this site. We’ve been amazed at how much utility this innovative service has had for Australians. We’re extremely disappointed, but please follow us, and we’ll update you if things change. Feel free to contact us at any time too.
CEO and Founder, Living Room of Satoshi
This implementation of a Bitcoin and Cryptocurrency tax shows not only just how little law makers and government agencies know about crypto but also that they do not consider that these overreaching regulations can stifle innovations. If this double taxation is the intended effect of the GST ruling on Bitcoin then, it has the intended outcome. If the double taxation is an unintended outcome of the GST ruling then it illustrates how blindly creating laws and taxes without understanding the subject can have chilling effects on the industry.
The Living Room of Satoshi allowed people to pay their bills in Bitcoin, bridging the gap between the two. It was an excellent innovation and resource to both Bitcoin and Cryptocurrency users as well as the utilities companies that were receiving their payments via this service.
Double taxation actually happening should be a big eye opener to the people around the world that use Bitcoin and Cryptocurrencies. Regulations that are not well thought out can stop legitimate businesses from operating. The NYDFS proposal is another such regulatory proposal that can and will have just as chilling an effect on the industry. Do not be passive or more types of legislation like this will happen. The Living Room of Satoshi closing down should remind everyone of the real consequences of too-tight regulation.
Images from Shutterstock.
Last modified (UTC): October 15, 2014 09:46