Australian govt consults on digital currency taxation legislation

Maria Nikolova

The purpose of the legislative changes is to remove the double taxation of digital currency.

The Australian government is looking for the best way to address the so-called “double taxation” of digital currency which is now prescribed by the Goods and Services Tax (GST) law. The push comes amid a sharp growth in the use of this particular type of medium of exchange.

The government has published exposure draft legislation and explanatory material for amendments to the GST law. The public consultation on these proposals will run for four weeks, closing on July 26, 2017. The draft legislation would have a retrospective start date of July 1, 2017.

In summary, from July 1, 2017, digital currency will be treated just like money for GST purposes. At present, consumers who use digital currencies have to bear GST twice: once on the purchase of the digital currency and once again on its use in exchange for other goods and services subject to the GST.

The proposed amendments would define digital currency as needing to broadly have the same features as state fiat currencies. In particular, in the same way as state fiat currencies, the value of a digital currency must derive from the market’s assessment of the value of the currency for the purposes of exchange, although it lacks an intrinsic value.

To be considered as a digital currency and to have the same treatment as state fiat currencies for GST purposes, digital currencies must be suitable for use as a medium of exchange. Digital assets that are not suitable for use as consideration, or which are only available to the public subject to restrictions of their use, such as loyalty points provided by retailers or ‘currencies’ used in some online multiplayer games, do not fall within the scope of digital currency as they cannot be used in the same way as money.

The use of distributed ledger technology for applications such as record-keeping will not result in the creation of a digital currency as this does not involve fungible units suitable for use as consideration.

The government hopes the law amendments will make it easier for innovative digital currency businesses to operate in Australia.

Read this next

Digital Assets

Voyager issues notice of default to recover $660M from Three Arrows Capital

The clock is now ticking for the crypto hedge fund Three Arrows Capital (3AC) to present a plan to meets its financial obligations towards digital asset brokerage platform Voyager Digital.

Digital Assets

GEM commits $200 million capital to CeDeFi exchange Unizen

CeDeFi exchange Unizen announced that it has received a $200 million capital commitment from a new strategic partner, Global Emerging Markets (GEM).

Digital Assets

Ripple opens office in Canada as looking for new HQ in the works

Ripple, the San Francisco-based fintech company, continues to consider alternative locations for its business amid ongoing regulatory woes in the US over its cryptocurrency.

Digital Assets

Goldman Sachs wants to snap up Celsius assets at big discount

Goldman Sachs is reportedly looking to secure $2 billion in funding to buy up distressed assets from Celsius in the event that the troubled crypto lender goes bankrupt.

Institutional FX, Interviews

iFX EXPO International 2022: What is a Prime of Prime?

We explore established Prime of Primes with qualified and accessible liquidity.

Crypto Insider

What is a Cryptocurrency Crime, and How Does it Affect Trading?

Cryptocurrency crime is as sinister and upsetting as most financial crimes. The crimes that are perpetrated range from ordinary theft of cryptocurrency to money laundering and market to market fraud. Investors and consumers are subject to phishing and scams, where they are instructed to send cryptocurrency to a specific location for ransom. Like all financial […]

Crypto Insider

As Bitcoin’s Ecosystem Expands, The Floodgates Open Up For Investors

It’s the year 2045 and Bitcoin has emerged as the world’s reserve currency and the most common store of value. The price of BTC is stable at around $33 million per coin and it’s widely accepted across the planet for everyday goods and services.

Digital Assets

Bybit launches crypto options settled in USDC stablecoin

Cryptocurrency exchange Bybit now offers put and call options contracts settled in USD Coin (USDC), a major stablecoin pegged to the US dollar.

Digital Assets, Industry News

Colendi acquires blockchain specialist SETL

Turkey-headquartered embedded fintech services platform Colendi has acquired London-based blockchain settlements and payments provider SETL.

<