The Australian government’s new bill, introduced on September 14th, changes the way the country’s goods and services tax treats cryptocurrencies. This new bill will solve the problem of double taxation that often resulted, due to the GST laws not treating cryptocurrencies, like bitcoin, as money.
In recent years, there have been many cases where Australian citizens paid extra taxes because they purchased cryptocurrencies and then used the cryptocurrency to buy taxable goods. Since the country did not consider digital currencies to be regular money, there was taxation on the purchase of cryptocurrencies as well. The country first identified this issue back in 2015, when the Senate Economic References Committee began an investigation to best define digital currency within the Australian regulatory frameworks.
At that time, the Australian Taxation Office had said that digital currency was not real money, and the problem of double taxation was quite common and bothersome. The Senate Committee, after its investigation, suggested that the government treat cryptocurrencies as real money for GST rules to avoid the unnecessary problem of double taxation. The Product Commission came to a similar conclusion follow its own independent inquiry.
Cryptocurrencies will be treated as real money
In May 2017, it was announced that cryptocurrencies will be treated as real money in all transactions after July 1st, provided both houses of the Parliament pass the bill. The bill was passed on September 14th, and the problem of double taxation was solved.
The need to resolve this issue was evident by the fact that more than 6,500 business across the world accepted bitcoin in 2015. Some 200 businesses in Australia did the same at the time. The use of bitcoin had doubled between 2013 and 2015. Since the Australian government knows how important cryptocurrencies, like bitcoin, are in the modern day, it has made a decision to facilitate its use in the country so that Australia is not left behind in this digital age.
The bill required the changing of the definition of money in the GST bill, as well as an addition of the definition of digital money. The decision by the Australian government was received with warmth by experts all over the country. A lot of them expressed their contentment over the fact that the government was putting the needs of the citizens at the front. Since the government is trying to help the Australian fin-tech sector thrive, it is a positive move no matter how one looks at it.
Paul Drum, Head of Policy at CPA Australia, said that these changes are welcome, and they will help the Australian entrepreneurs and businessmen compete better with their global counterparts since they no longer face the obstacle of double taxation on cryptocurrencies. He added that it’s good for the fin-tech sector of the country, which is on the rise.
PwC, Melbourne’s indirect taxes director Michael Barnett said the removal of double-taxation is a positive change and that ‘quite wisely the government opted for a principles-based definition of digital currency’. As for industry participants, Michael Barnett is quite sure they will all provide unanimous support for this bill. This is because this change is attractive for newcomers, allows more flexibility, and will lead to a marked reduction in administration costs as well.
The Treasury Laws Amendment (2017 Measures No. 6) Bill 2017 will solve the problems that Australian fin-tech players face while competing with competitors from across the world. The problem of double-taxation was a huge inhibitory force for anyone dealing in cryptocurrencies. Since more and more businesses are pushing towards accepting these currencies, the Australian government’s decision to relieve double-taxation comes as welcome news for the entrepreneurs. Some more amendments to the GST rules will see the Australian fin-tech sector thrive even better, but this is a great start.