The Australian Taxation Office is increasingly concerned at the growth in crypto-currency Bitcoin.
It will soon release a ruling on how the digital currency is to be treated for tax purposes. The decision may have significant consequences on the usage of the currency in Australia.
The ATO was initially unconcerned by the emergence of the crypto-currency in 2009. However, it became worried at the growth in the digital currency and its potential for usage in tax avoidance schemes.
Freedom of Information documents obtained by the ABC show the ATO will decide later this year whether to treat Bitcoin as money, like foreign exchange currencies, or to classify it as goods.
If the ATO opts not to treat it as money, Bitcoin transactions will attract different taxes and accounting standards to normal transactions.
President of the Bitcoin Association of Australia, Jason Williams, said that if the ATO found that Bitcoin was not money then complications would arise with its GST treatment.
“If a merchant sells a widget for 100 bucks and that customer then wants to pay in Bitcoin and the merchant wants to receive Aussie dollars at the end of the day… then a GST will be levied on that entire 100 amount,” he told Dynamic Business.
“It’s actually a double-whammy GST if Bitcoin is treated as non-monetary supply. If the tax department comes out and says Bitcoin is not money it makes everything more expensive. That basically makes everything in Australia more expensive by ten per cent if you’re using Bitcoin.”
However, Mr Williams said the mere fact the ATO was now preparing guidance rules on the tax treatment of Bitcoin was a further step in the legitimization of the currency.
“The simple fact that they’re thinking about it already adds a huge air of legitimacy,” he said. “They are not dismissing it or sweeping it under the carpet. Bitcoin is a real thing.”
Chairman of the Australian Digital Currency Commerce Association, Ron Tucker, also told Dynamic Business he was concerned about the ATO guidance on the treatment of Bitcoin.
“If it’s treated as a barter system, then we may be subject to two rounds of GST on the total of the Bitcoin value itself at purchase and then on actual delivery of the service itself… It could be a double GST issue.”
“It could hold Australia back and we won’t stand to benefit and realise it’s (Bitcoin’s) promise.”