The Australian government has announced that it will back a legislative solution to tax concerns surrounding bitcoin as part of a broad policy statement on financial technology.
Under current tax guidance in the country, bitcoin is considered a form of barter rather than a form of money. Australian businesses must pay goods-and-services tax (GST) if they sell digital currencies, and can be liable for the tax should they receive them as payment.
This policy has sparked criticism from the startup community in Australia, who argue it creates an unfair tax environment. Last summer, the Australian Senate called for proposals to resolve the problem in a report on digital currencies.
The government said today that it will work with the digital currency industry in Australia to find a solution, stating:
“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.”
Australian Treasurer Scott Morrison said today that the government “won’t be taxing digital currencies”, according to the Australian Financial Review.
The statements came in a wide-ranging policy statement on FinTech released by the Australian government. The statement offered new details on how the government plans to regulate companies working on new financial technologies as well as digital currencies and blockchain applications in particular.
The government wants to ease rules for investors and startups in the FinTech space, the latter of whom would be afforded flexibility within a “regulatory sandbox” approach. An advisory group dedicated to FinTech issues has also been formed, chaired by Westpac Bank director Craig Dunn.
“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 in the future,” the government said.
Legislative plans for distributed ledgers
The country’s anti-money laundering regulator, the Australian Transaction Reports and Analysis Centre, voiced its support for blockchain technology in a statement included in the policy release, stating that it believes the tech could “significantly reduce the costs of compliance and regulation imposed on reporting entities”.
Notably, the regulator said that it will seek new rules governing the use of distributed ledgers in financial services.
“This new technology can ensure that sensitive financial data used for intelligence purposes remains secure, transparent and protected through the use and application of encryption,” AUSTRAC said, going on to explain:
“For such a system to be resilient to systemic risk or criminal exploitation, two levels of complementary regulatory approaches will be required: a high-level guiding legislative framework; and a set of agreed rules that determine the operation of the algorithms encoded by the software.”
AUSTRAC did not indicate when it would develop these new regulations, saying that this process would involve the participation of “stakeholders”.
Government debating AML rules
Elsewhere in the policy release, the government indicated that it continues to weigh whether to apply financial surveillance rules to digital currency exchange services in the country.
The Australian Attorney-General’s Department, according to the release, is in the process of evaluating whether existing anti-money laundering and know-your-customer regulations should be amended to cover domestic exchanges. The move is framed as an application of those regulations to all FinTech startups in Australia.
“The current review of Australia’s anti‑money laundering and counter‑terrorism financing (AML/CTF) regime is considering a range of measures to support the development of the FinTech industry,” the government said. “The review is considering whether AML/CTF regulation should be extended to include convertible digital currency exchanges.”
The office said that it is “considering how to make the obligations under the AML/CTF regime technology neutral”, and plans to submit a report to Australian Department of Justice on possible approaches.
The Australian government said that it is seeking to support businesses that develop and use FinTech, making particular note of the Australian business sector’s growing interest in blockchain technology.
The government said:
“While it is in the early stages of development, the technology has the potential to radically simplify the way our market operates end‑to‑end, with significant benefits to investors, participants, regulators and government agencies.”
This report has been updated.
Image via Shutterstock