Digital currencies such as Bitcoin will no longer be subject to the GST, the federal government announced during last night’s budget.
The government said it will align the GST treatment of digital currency (such as Bitcoin with money from 1 July. Bitcoin and other digital currencies will no longer suffer the current ‘double taxation’ burden.
Digital currency is currently traded as “intangible property” for GST purposes. This means that consumers who use digital currencies as payment can effectively pay the GST twice – once on the purchase of the digital currency and again on its use in exchange for other goods and services subject to the GST.
“Removing double taxation on digital currencies will remove an obstacle for the Fintech sector to grow in Australia,” budget papers said. “This measure is estimated to have a small but unquantifiable decrease in GST collections and associated payments to the states and territories over the forward estimates period.”
The double taxation burden has been an issue since a ruling by the Australian Taxation Office in mid-2014 forced businesses to pay double the amount of GST for sales of products and services using Bitcoin exchanges.
At the time, Bitcoin advocate, Craig Wright, said the ‘double dipping’ of tax would result in businesses dealing with offshore exchanges, which would put the Australian Bitcoin market at a disadvantage.
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