Tax authorities of the country have decided that operations with Bitcoin are subject to the Goods and Services Tax and suggested that the cryptocurrency should not be classified as “money”. This will mainly affect Australian businesses that accept and change Bitcoins, providing service for customers who want to trade real money for the digital currency. Now, when Bitcoin is bought from an exchange, the latter will have to pay tax on the supply of the cryptocurrency.
Goods and Services Tax doesn’t normally apply to financial transactions, i.e. a conventional money exchange won’t have to pay it when Australians buy foreign currency. So, the application of this tax to Bitcoin will make running a Bitcoin exchange in the country an expensive proposition, because it is due on the total amount of cryptocurrency supplied, not on the cut the service takes above the market value.
Nevertheless, the way an exchange operates in reality will make a difference. Apparently, Bitcoin “trading platforms” will be liable for much less tax under the new rules, with a difference being in whether the firm buys and sells Bitcoin itself, or simply facilitates transactions between 3rd parties like a stock exchange. In the latter case, the tax is only due on the percentage commission the service charges, rather than on the total amount purchased.
In the meantime, the decision will also complicate operations involving spending Bitcoin, as it would require sellers accepting the cryptocurrency to treat it as a “taxable supply”, unlike money exchanged for goods and services. Tax authorities justified treating Bitcoin in this way by the fact that the cryptocurrency is not a legally recognized universal means of exchange and form of payment by the laws of any country – in other words, it is not currency and therefore not money.
Goods and Services Tax doesn’t normally apply to financial transactions, i.e. a conventional money exchange won’t have to pay it when Australians buy foreign currency. So, the application of this tax to Bitcoin will make running a Bitcoin exchange in the country an expensive proposition, because it is due on the total amount of cryptocurrency supplied, not on the cut the service takes above the market value.
Nevertheless, the way an exchange operates in reality will make a difference. Apparently, Bitcoin “trading platforms” will be liable for much less tax under the new rules, with a difference being in whether the firm buys and sells Bitcoin itself, or simply facilitates transactions between 3rd parties like a stock exchange. In the latter case, the tax is only due on the percentage commission the service charges, rather than on the total amount purchased.
In the meantime, the decision will also complicate operations involving spending Bitcoin, as it would require sellers accepting the cryptocurrency to treat it as a “taxable supply”, unlike money exchanged for goods and services. Tax authorities justified treating Bitcoin in this way by the fact that the cryptocurrency is not a legally recognized universal means of exchange and form of payment by the laws of any country – in other words, it is not currency and therefore not money.
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