Government working to end the double taxation of Bitcoin
Currently, consumers are taxed when they receive digital currency.
The government has announced its support for the Productivity Commission's recommendation that digital currencies such as Bitcoin should be treated as a financial supply for GST purposes.
This recommendation is to eradicate the double taxation issue of Bitcoin and other digital currencies, to ensure that businesses that use these currencies are not being taxed twice to do so.
Currently, consumers and businesses are effectively taxed twice when using digital currency to purchase goods and services that are already subject to GST. This is because the supply of digital currency is taxed, meaning the consumer pays GST when receiving the currency and again when purchasing anything already subject to GST.
The Productivity Commission recommends that the definition of money in relevant GST regulations be updated to include digital currency. It also recommends that the Anti-Money Laundering and Counter-Terrorism Financing Act be updated to include the regulation of digital currency businesses for anti-money laundering and counter-terrorism financing purposes.
The government agrees with this approach, saying “The government is committed to facilitating innovation and growth in the digital currency sector,” in its response.
“The government agrees that consumers should not be subject to the GST twice when using digital currency to purchase goods or services.”
“The government is working with the FinTech Advisory Group on options to reform the current GST treatment of digital currencies and has released a consultation paper for public consideration as part of the 2016-17 Budget,” the response said.
The government has already previously announced its commitment to solving the issue of double taxation of digital currencies in a report released in March 2016. However, little has been done towards a solution since.
Just last week Bitcoin’s value soared to record-setting highs, with the digital currency climbing above US$1,500 late last week.
The surge was the result of increased interest in the digital currency and a steep rise in global trading activity.