Following a recent report by LeapRate in August that the Australian government had classified Bitcoin as a non-monetary entity due to concerns surrounding the possibility of internet-based currencies assisting tax avoidance by commercial users, a backlash has ensued from the Australian Digital Currency Commerce Association.
As may well have been expected, proponents of virtual currencies in Australia are now calling for what they consider to be a correction in the Bitcoin taxation rulings.
Ronald Tucker, Chairman of the Australian Digital Currency Commerce Association, has called for a reopening of the Senate inquiry into digital currencies in order to attempt to redress what he considers to be a blow to the Bitcoin industry.
“I am pleased the inquiry announced today will look at tax treatment issues, which I hope will lead to a correction of the current interpretation of bitcoin as taxable supply,” said Tucker in a statement.
“ADCCA recognises the need to bring digital currencies under the auspices of appropriate regulatory bodies such as the Australian Transaction Reports and Analysis Centre (AUSTRAC), to ensure the highest standards of consumer protection and safeguard national security,” stated Mr. Tucker.
The Australian Tax Office has officially stated that under most circumstances there would be no income tax or Goods and Services Tax (GST) implications for individuals if they are not in business or carrying on an enterprise, and if they pay for goods and services in the cryptocurrency.
Under the guidelines, any capital gain or loss from the disposal of bitcoin paid by an individual to purchase goods or services for personal use or consumption will be disregarded as a personal use asset. However, individuals using bitcoin as an investment may be subject to capital gains tax rules when they dispose of it, as they would for share assets.
“The Australian Tax Office’s paper has unfortunately taken the position to treat the supply of bitcoins the same way as an exchange of a commodity; something that would involve the costly and impractical imposition of GST on the supply of bitcoins,” said Tucker last month in response (PDF) to the ATO’s guidance. “Bitcoin by its very nature is used as a currency and a store of value, and we believe it should be treated by the ATO in the same way as other financial inputs such as foreign exchange.”
Now, Mr. Tucker is calling for government regulation to encourage innovation, entrepreneurship, and growth in the digital currency sector, with the hope that such support from the government will help create more jobs in the space, while making Australia a leader in financial technology.
“The overwhelming majority of bitcoin consumers and businesses use the technology for legitimate reasons, and are doing great things to grow the digital economy in Australia,” he said. “The emergence of this exciting new global industry is something Australia is well positioned to take advantage of.”
Mr. Tucker’s opinion is that appropriate government oversight would provide certainty for the digital currency sector and discourage illicit activity.