The Australian Taxation Office (ATO) has announced that it intends to work bitcoin capital gains and sales tax guidelines into its system for users to declare on tax returns this year. Its US equivalent, the IRS, is said to be investigating a similar implementation.
ATO senior assistant commissioner Michael Hardy provided a statement to the Financial Review’s Sunday program on Australian TV, saying the office has been monitoring the development of bitcoin and wondering how to tax such “new types of payment tokens”. He said:
“The ATO is working on a holistic understanding of the taxation treatment of bitcoin to be in a position to provide certainty for the Australian community.”
Businesses would need to account for bitcoin transactions when calculating Australia’s Goods and Services Tax (GST, similar to VAT) by recording the transaction’s value in dollars and also determining which other tax or investment rules might apply.
This does not mean the ATO will accept tax payments in bitcoin. But it does show promise that a government is preparing to take bitcoin seriously and include it in its regulatory structure somehow. The current Australian tax year will end on 30th June, with a deadline for returns to be submitted by 31st October.
Australia’s main financial regulator, the Australian Securities and Investments Commission (ASIC) is also conducting its own analysis of the bitcoin economy.
“Electronic currencies or cryptocurrencies – which include bitcoins – are a developing area globally. Like other regulatory bodies around the world, ASIC is considering whether and how current legislation (such as the Corporations Act) might apply to these arrangements,” said ASIC spokesperson Hilarie Dunn.
The Sunday TV program also gave an introduction to bitcoin and interviewed local startups working with it, including mobile developer Bitscan, and questioned whether bitcoin should be regarded as a commodity or a currency. Australia’s Treasury department says it has “no plans on recognizing it as legal tender at this stage.”
“Not only is it not going away, it’s going to grow,” one of the Sunday report’s interviewees said.
“In simple terms, it’s a currency with value. And it’s real, and it has an impact that’s real. You can buy a coffee in St Kilda in Melbourne with a bitcoin. You can do business globally with a bitcoin. That’s real.”
Regulators, for all their good or other intentions, still have not indicated how they intend to trace or police bitcoin transactions, given that even in cases of theft and criminal proceeds seizures they have proved difficult to find. This would be a necessary step towards including bitcoin gains in taxable income.
Investments in bitcoin itself could be measured as simple capital gains, if ownership of bitcoins were as easy to track as other commodities or financial instruments.
Parliament Image via Shutterstock
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