CTH Government Releases Bill That Would Make Digital Currencies No Longer Subject to Double Taxation

The Federal Government has introduced the Treasury Laws Amendment (2017 Measures No. 6) Bill 2017 (Cth) (the Bill) into Parliament.  The Bill proposes to amend the current GST laws so that digital currencies, such as Bitcoin and Ethereum, will no longer be subject to double taxation.

The Bill was introduced into the House of Representatives by the Federal Treasurer, Scott Morrison on 14 September 2017 and still needs to be approved by both Houses and receive Royal Assent. If passed, the legislation will apply from 1 July 2017.

Background to the Bill

The legislation follows a promise made by the Federal Government in the 2017 Budget, when it pledged to exempt purchases of digital currencies from the GST from 1 July 2017.  The Treasurer had committed the government to address the issue as early as March 2016.

Treasurer Morrison says the proposed change will “further cement Australia’s reputation as a global Fintech centre”.

The Proposed Amendments

It is anticipated that Schedule 1 will amend A New Tax System (Goods and Services Tax) Act 1999 (Cth)  to ensure that supplies of digital currency receive equivalent GST treatment to supplies of money, particularly foreign currency.

Schedule 2 proposes to amend the Income Tax Assessment Act 1997 (Cth) to include the Centre For Entrepreneurial Research and Innovation (CERI) on the list of deductible gift recipients, allowing members of the public to make tax deductible donations to CERI.  CERI is based in WA and is a registered charity that works with universities, research institutes, government, private enterprise and industry to promote the entrepreneurial mindset and commercialise innovative ideas in Australia. The CERI encourages innovators to create start-ups that are based in Australia, instead of moving overseas.

The proposed amendments also mean digital currencies (such as Bitcoin and Ethereum) will be treated similarly to ordinary currency for GST purposes. If the proposed amendments are passed, supplying and purchasing of digital currency would no longer be subject to GST. This rule, however, is subject to one major exception.

If the supply of digital currency is made in exchange for money or digital currency — for example, supplying Bitcoin tokens in exchange for Ethereum tokens — this transaction will still be subject to GST. If digital currency is acquired, GST won’t be charged on this transaction, but if you are supplying digital currency in exchange for money or other digital currencies, GST will be charged on this transaction.

Proposed Changes to Benefit Taxpayers

According to the Bill’s Explanatory Memorandum, it is anticipated that the changes will be of benefit to taxpayers, see para [1.51]:

Where to next?

According to the ATO, taxpayers affected by the proposed measures may lodge their BAS in accordance with current law, or with accordance to the announced measures, while waiting to see whether this Bill is passed.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products. Nothing on this website should be construed as legal advice and does not substitute for the advice of competent legal counsel.

Legislation introduced to remove double taxation on digital currencies: What this means for startups – smartco.com.au

Treasury Laws Amendment (2017 Measures No. 6) Bill 2017 (Cth) and supporting material as reported  in TimeBase's LawOne Service