Australia hopping closer to scrapping sales tax on bitcoin

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The Australian government wants to end the ‘double taxation’ of digital currencies. Australia currently considers digital currency as an ‘asset’ and, therefore, payments in digital currency are considered barter leading to sales tax (where relevant) being applied on the digital currency and the good/service provided.

In response to the detriment to the fintech economy and pending new laws that will make the foreign supply of digital goods/services to Australia being subject to domestic sales tax, the Australian Treasury has issued a discussion paper suggesting ways to change the status of digital currency from an ‘asset’ to an alternative status that would remove the GST (sales tax) requirement. The two suggested options broadly are to consider digital currency as a financial supply (input taxed) or as ‘money’. Categorisation as money will require an amendment of the law; but categorisation as a financial supply would require no legislative action. The Treasury seems more keen (reading between the lines) on the categorisation as a financial supply, mentioning the “significant technical difficulties and administrative complexities created by treating digital currency as equivalent to ‘money’”. There is a slight trade-off between the two definitions in terms of whether you can claim ‘input tax credits’ on the acquisition of digital currency – details here.

According to the Paper, considering digital currency as a financial supply would be “similar to the treatment provided to Bitcoin in the European Union and the United Kingdom”.

If you’d like to comment, email digitalcurrency@treasury.gov.au before 3 June. See here for more details.