Digital currency transactions should be treated in the same way as fiat currency transactions for the purposes of Goods and Services Tax (GST), according to the Australian Senate Economics References Committee.
A new report from the committee suggests changing the way in which transactions involving bitcoin or other digital currencies are classified.
The recommendation represents a significant shift from a previous ruling by the Australian Taxation Office (ATO), which stated digital currencies were "intangible assets" and should be taxed as such.
The report, titled Digital Currency — Game Changer or Bit Player, states:
"The committee is of the view that digital currency should be treated as money for the purposes of goods and services tax. As such, the committee recommends that the government consults with the states and territories to consider amending the definition of money in the A New Tax System (Goods and Services Tax) Act 1999 and including digital currency in the definition of financial supply in A New Tax System (Goods and Services Tax) Regulations 1999."
Those who made submissions to the committee, which was chaired by Senator Sam Dastyari, included Perianne Boring, president and founder of the Chamber of Digital Commerce and Ronald Tucker, chairman at the Australian Digital Currency Commerce Association.
Anglo-Australian bitcoin exchange CoinJar, the Bitcoin Foundation, the Bitcoin Association of Australia were also among the 48 organisations that submitted information.
If approved, the change will bring Australia's stance on bitcoin taxation in line with that of the UK. In March last year, HMRC – the UK's authority responsible for the collection of taxes – recognised bitcoin as a currency.
More taxation concerns
Despite the general consensus with regards to the exemption from GST, there seemed to be an extent of disagreement in relation to other taxation concerns.
"Differing views were expressed in relation to whether digital currencies should be treated in the same way as foreign currencies for the purposes of income tax, fringe benefits tax (FBT) and capital gains tax (CGT)," notes the report.
Some submitters did not agree with the ATO's interpretation of the existing law, arguing there was enough room within the legislation to define digital currencies as foreign currencies as opposed to commodities.
The Tax Institute noted that if a foreign country decided to adopt bitcoin as legal tender, a situation would arise whereby bitcoin would fall within the category of a "currency of a foreign country" and "currency other than Australian currency".
The report adds:
With this in mind, the committee – which held its first cryptocurrency hearing in November last year – concluded that further research and analysis was necessary to determine whether digital currency should be treated in the same way as foreign currencies in relation to income tax and fringe benefits.
In August last year, ATO published its bitcoin taxation guidelines, which stated how bitcoin businesses and enthusiasts would be taxed in the country.
Earlier this year, Coin Loft, an Australian exchange, received an official ruling exempting it from having to charge GST on local bitcoin sales. The firm ceased charging GST in late January.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.