Bitcoin Australia Launches Preemptive Strike Against Restrictive Taxes
Australian bitcoin advocacy association Bitcoin Australia (BA) has published a paper detailing its recommendations for how bitcoin taxation should be managed by domestic authorities.
By producing the paper, BA is preempting the Australian Tax Office (ATO), which is expected to release its own official guidelines sometime in the next few weeks.
BA's recommendations are designed to fit within the framework of existing Australian federal tax legislation, factoring for income, capital gains and a goods-and-services tax (GST). At the proposal's heart, however, is the legal definition of digital currency as 'money', which it describes as "any generally accepted medium of exchange for goods and services and for the payment of debts".
The 12-page paper, crowdsourced by local experts with the help of Australian legal firms Adroit and McCullough Robertson, all of whom worked pro bono, recommends the tax office take "the practical approach" to defining bitcoin, stating:
"If the approach taken by ATO were to counteract the efficiency and simplicity of the bitcoin process, these innovative businesses would not be viable. This will push both the innovators and the investors offshore and it will see alternative jurisdictions benefiting from Australian innovation and capital."
Bitcoin is money
Bitcoin's lack of a central authority, and ability to be used and accepted universally by anyone, differentiates it from other non-cash payments such loyalty points and frequent flyer miles.
BA believes bitcoin can exist within Australian tax law's broad definition of 'money' as-is, without changing the fundamental operation of systems like the GST. Indeed, outside of its function as money, bitcoin has little reason to exist regardless of how it is defined legally.
The paper points out that bitcoin can also be considered 'property' under GST and thus an 'asset' under capital gains tax, also under existing legal precedents and definitions.
Keeping BTC prices low
The GST, which is Australia's sales tax, taxes anything that fits its broad definition of a 'supply' (ie: goods and services). This typically does not include money to prevent the tax from being inappropriately applied twice during a single transaction. Instead, money is defined as a 'consideration', or payment, for the supply.
BA says treating a medium of exchange like bitcoin as 'supply' would drive prices up by 10% and cause Australian consumers to make their purchases overseas, rather than locally.
It has a point: a high-valued local currency and 10% GST on local purchases have already seen shoppers turn to online retailers overseas, leaving Australia-based retailers fuming.
Taxation is inevitable
Providing some extra details in a privately addressed letter to a business owner, an ATO official said the department would tax bitcoin under income, capital gains and GST laws.
So far, however, it has not said what legal status bitcoin should have under those guidelines, leaving businesses to speculate.
Australia open for business
Local bitcoin advocates see the tax treatment of bitcoin in much grander terms, choosing to focus on the potential economic effects Australia could face, should it eschew appropriate taxation.
"Bitcoin and cryptocurrencies are not going away – the genie is out of the bottle. It's really up to the Australian government to embrace the change that is happening right now, and position Australia as a center of excellence."
Williams continued, implying the decision could have far-reaching economic impacts:
"By seeing bitcoin in the same light as traditional Australian dollars, the government positions Australia as a place that will attract investment and usage, bolstering the Australian economy by bringing in overseas investment. Australia will become known around the world as a place that is not afraid to welcome change."
BA's paper also describes the growth of Australia's bitcoin economy, saying it grew by 480% in the first four months of 2014, with an estimated 192 businesses and 7% of the world's investment focusing on bitcoin ventures.
The group said it is available to help and assist any government department or agency understand bitcoin further, and would welcome the opportunity.
Bitcoin Australia, also known as The Bitcoin Association of Australia, is affiliated internationally with the Bitcoin Foundation and serves as its local chapter.
Citi: Bitcoin a Threat to Debit and Credit Card Issuers
$5 Billion Insurance Company Offers Bitcoin Coverage to...