Bitcoin has gotten a major boost in Australia after a government inquiry reversed an earlier decision treating bitcoin as a commodity for sales tax purposes.
The Senate Economics References Committee's review of digital currency has recommended that bitcoin be considered “national or foreign currency” for Goods and Sales Tax (GST) purposes. This overturns previous guidance from the Australian Tax Office (ATO) deeming it a commodity, thereby subjecting its purchase to GST.
In becoming one of the few jurisdictions where consumers had to pay a sales tax of 10%, the original guidance had upset the local crypto industry and drove bitcoin broker CoinJar to move its main operation to the United Kingdom.
The ATO itself recommended that bitcoin be considered as “money” at a Senate inquiry in December. It differentiated between “money”, which should include anything treated like money by society, and “currency”, which is backed by a government. The ATO commissioner acknowledged as far back as last August that bitcoin may be considered as money in the future.
The Senate inquiry into digital currencies began last October and has thus far received 48 submissions.
Senator Sam Dastyari, who chairs the Committee, told The Australian Financial Review that the country's tax authorities don't stand to lose much in revenues.
"The amount of revenue in question is negligible. The opportunities for trade, investment, high salaries and world-leading skills are far more important, and I urge the states to work with the Commonwealth to make what amounts to simple change," he said.
He added, "The Treasury ministers need to work with the states to make the changes necessary to bring our legislation into the 21st century."
He acknowledged that the change is a relatively small step for the economy, but it sends the right message to local entrepreneurs that the government is listening.
It is most probable that even if the decision to treat bitcoin as money for sales tax had not been made, it still would have been treated as such for the purposes of money transmission and Anti-Money Laundering (AML) ) laws. The Committee has indeed recommended that regulations treating bitcoin like money in this realm be enacted. In the US and elsewhere, bitcoin is treated like property for tax purposes but is still subject to money services licensing laws. Thus, nothing is lost on the money transmission side, and the change is a net gain for Bitcoin in Australia.
