The Australian Taxation Office (ATO) has released some much-awaited guidance regarding Bitcoin-related taxes. The cryptocurrency community already knew the authority was working on some new rules and the time of release actually makes a lot of sense with the guidelines being published alongside Australia’s 2013-1014 income tax returns.
The new set of regulations also becomes public in time to guide the growing group of Bitcoiners that is developing the crypto-scene in Australia. According to CoinTelegraph, Australia currently has around 40,000 active BTC users, as well as 190 Bitcoin-friendly companies.
Numbers revealed by the Bitcoin Association of Australia show that the Australian share of the Bitcoin market capital is almost two percent at the moment, which means the market capitalization for Australia is equivalent to approximately $120 million.
Regarding the new Bitcoin guidelines, “the guidance paper and draft tax rulings issued provide certainty for the Australian community on the ATO’s treatment of cryptocurrencies within the current legislative framework, said Michael Hardy, the authority’s senior assistant commissioner.
The regulation’s summary explains that:-
Transacting with Bitcoins is akin to a barter arrangement, with similar tax consequences.
The ATO’s view is that Bitcoin is neither money nor a foreign currency, and the supply of Bitcoin is not a financial supply for goods and services tax (GST) purposes. Bitcoin is, however, an asset for capital gains tax (CGT) purposes.
The records you require in relation to Bitcoin transactions are:
- the date of the transactions
- the amount in Australian dollars (which can be taken from a reputable online exchange)
- what the transaction was for, and
- who the other party was (even if it’s just their Bitcoin address).
This means Bitcoin transactions should now be treated like exchange transactions with comparable tax consequences, unless they are occurring for business purposes. “People involved in buying or selling Bitcoin or other cryptocurrencies — whether individuals or businesses — are encouraged to read our guidance. If their circumstances are not covered by the guidance, they can seek a private ruling by contacting us”, reads the document.
The guidelines also refer the following points:-
- Using Bitcoin for personal use – There won’t be any GTS or income tax implications for people using Bitcoin for personal transactions. If the user doesn’t own a company and just wants to pay for services and goods in Bitcoin, he will not be susceptible to any kind of tax returns. However, the purchases must not exceed AUD$10,000.
- Using Bitcoin for business – those who want to use Bitcoin for business and trade it for services and goods will have to record the value of the purchases in Australian dollars, and mention it as part of their income. The process is similar to receiving non-cash consideration under a barter transaction. When a business receives bitcoins in exchange for services and goods, it may be susceptible to GTS charges on those bitcoins.
- Using Bitcoin for services and goods – businesses looking to buy business items with Bitcoin are entitled to a deduction derived from the value of those specific items. GTS will be calculated after the general market value of the services and goods. This will be equal to a fair market valuation of Bitcoin at the time the transaction took place.
- Capital gains – ATO mentions that there may be capital gain tax consequences when companies will disposal of bitcoins. Yet, any capital gain will be reduced by the amount included in that company’s quantifiable income as regular income.
- Using Bitcoin to pay for salaries – when employees have a working contract with a company, and they choose to be paid in bitcoins rather than Australian dollars, the payment is considered as fringe benefits, which means the employer will be susceptible to provisions of the Fringe Benefits Tax Assessment Act.
- Mining Bitcoin – income derived from mining bitcoins as a business will be included in that company’s assessable income. During the mining process, any expenses incurred would receive a deduction. Loss during the mining process may lead to non-commercial loss provisions.
According to the ATO, people using Bitcoin outside of the business sphere won’t have to pay any income taxes or suffer GTS tax implications. Within these operations, cryptocurrency will be considered a personal use asset.