Senate Announces Digital Currency Inquiry, May Reverse Controversial ATO Decision
Monday 13 October 2014 @ 11.45 a.m. | Legal Research | Taxation
The Senate has launched an inquiry into digital currencies, to be chaired by NSW Labor Senator Sam Dastyari. The inquiry was announced on Thursday, October 2, with public submissions closing on Novmeber 28, and the final report due by the first sitting of Parliament in March 2015. The announcement of the inquiry follows the Australian Tax Office’s (ATO) announcement earlier this year that bitcoin and other digital currency payments would be taxed as “intangible assets”, which means companies must charge GST on bitcoin sales (see TimeBase’s earlier report on the decision). Many companies that use digital currencies, particularly bitcoin exchanges have protested this decision, saying that it makes Australian exchanges uncompetitive with the global market
Australian bitcoin exchanges CoinJar, Buyabitcoin and Hardblock have all announced their plans to begin charging 10% GST, but have been critical of the ATO’s decision. Buyabitcoin’s Holger Arians told SmartCompany:
“Bitcoin is an early-stage, disruptive technology, probably one of the most innovative fintech developments of our times. And like the internet in the early 90s, new technologies are often considered as useless, crazy or even scary when they are premature. But in a supportive and regulated environment (not meaning double taxing a virtual currency), these technologies can grow to something great.”
A senior tax lawyer from Adroit Lawyers, Reuben Bramanthan, also told SmartCompany:
“Australia’s bitcoin industry is acknowledged globally as being ahead of the curve, and we are now seeing real evidence that the ATO ruling could seriously impact a lot of the progress made to date… With international providers opening up to Australian customers, the ATO ruling is a real problem for Australian bitcoin businesses and it puts them at risk of being unable to compete.”
SmartCompany has also reported that Senator Dastyari has highlighted the possibility of a reversal of the ATO decision:
“It is interesting to note the UK initially treated digital currencies, such as bitcoin, as a taxable product, only to change their definition to a currency a couple of months later…
(Tax commissioner) Chris Jordan was quite clear that the ATO decided to treat bitcoin as a taxable commodity because it doesn’t fit within our current definition of a currency. We don’t have the legal or regulatory framework to treat it as a currency.
We note that the digital currency community argues that bitcoin, and others, are used effectively as a currency – a medium of exchange. The truth is government policy needs to catch up with a technology that has already emerged and is spreading quickly.”
Terms of Reference
The Committee will have scope to examine:
- Developing an effective regulatory system for digital currency with particular reference to tax law, competition and growth of the industry, stability both of the industry and the financial services industry as a whole, protection of consumers and businesses, and national security concerns
- The impact of digital currencies on the economy, including the payments, retail and banking sectors
- How Australia can take advantage of digital currency technology to establish itself as a market leader in this field
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