The Australian Government announced in its report entitled “Backing Australia's Fintech” that the current double tax law on digital currencies including Bitcoin is soon to be reformed.
Digital currencies such as Bitcoin were in 2014 established by the Australian Taxation Office (ATO) as intangible assets for goods and services tax purposes. Thus, payments involving bitcoin have been considered as a form of barter rather than conventional transactions. However, the major issue with the GST law on digital currencies is that Australian residents who purchase items or goods using bitcoin are required to pay a 10% GST on both the bitcoin transaction and the item itself, leading to “double taxation.”
Spurring Growth and Opening Opportunities
To spur the growth of digital currencies and open opportunities for investment, the Australian Government will be working closely with the country’s commercial banks and and the Australian Taxation Office to reform the applied GST law on digital currencies in the next few months.
“Removing the ‘double taxation’ treatment for GST on digital currencies and applying adequate anti-money laundering and counter-terrorism financing rules may facilitate further developments or use in the future,” read the report.
The government further emphasized the potential of digital currencies and their underlying technology, the blockchain technology, in the development of the finance and information technology industries. The government explained that it supports the ventures of the Australian Securities Exchange (ASX) and other financial institutions to explore the blockchain technology’s application in traditional financial systems.
‘Tight regulations restrict Transformation’
To maintain the explosive growth and adoption of the distributed ledger technology, the government will collaborate with other financial establishment and agencies to create a friendlier environment for digital currency users.
Government officials including Treasurer Scott Morrison have also expressed their support for the Australian Government’s decision to eliminate tax on digital currencies. Morrison believes that tight regulations on a growing technology like Bitcoin could restrict the transformation and transition of the Australian economy.
“We won't be taxing digital currency,” said Treasurer Scott Morrison in a statement. “Not applying GST to bitcoin and things of that nature, these are the sort of changes that support the transformation and the transition of your economy,” he continued.