By
Mayowa Adebajo
February 23rd, 2024
In a new review, the Australian Senate Economics References Committee recommended to treat bitcoin as any other currency for the purposes of the Goods and Services Tax.
The Australian Senate Economics References Committee has proposed that digital currencies should be treated like fiat currency for the purposes of the Goods and Services Tax (GST). In a new report considering transactions in cryptocurrency, the committee suggested to introduce legislative changes to treat bitcoin as regular money.
The review differs from earlier position of the Australian Taxation Office (ATO) towards digital currency taxation. Last year, ATO released guidance of tax treatment of cryptocurrencies, according to which bitcoin is neither money nor a foreign currency and is liable for capital gains tax (CGT).
The ATO’s rules were negatively perceived by the bitcoin community and some companies even warned they would have to relocate their businesses to other countries in order to avoid taxation. The recommendations expect to allow new bitcoin startups to stay in Australia.
“Without a doubt, the main benefit will be the confidence and certainty that removing a GST will provide to our own digital entrepreneurs, and the foreign businesses who want to set up here,” chairman of the committee, Sam Dastyari, told the Australian Financial Review.
“Most importantly, it will send the message to local tech entrepreneurs that their government is listening to them, and that in itself is a major step forward.”
The committee obtained submissions from several companies and individuals, including CoinJar bitcoin exchange, Ripple Labs, the Bitcoin Foundation, chairman of the Australian Digital Currency Commerce Association, Ronald Tucker, and the head of the Chamber of Digital Commerce, Perianne Boring.
“Harmonizing a global standard for digital currencies could provide clarity and an even playing field for technologists and companies that innovate using digital currencies,” Ripple Labs wrote in its submission.
The committee also noted in the report that there is still much to be done before authorities could properly regulate bitcoin.
The review will bring Australia in line with the UK, which is known for its progressive approach to the virtual currency and financial technologies. In 2014, the UK tax authorities stated that it would treat bitcoin like other currencies, thus bringing it closer to the mainstream adoption.
In the US, bitcoin is considered a property, not a currency, what means it could be taxed as any other property. It could be taxed as a capital asset, such as bonds and stocks. The authorities say those who mine digital currency are responsible for paying taxes on what they mine.
The report is anticipated to be submitted to the Australian senate till August 10.