Legislation introduced to remove double taxation on digital currencies: What this means for startups
Digital currencies such as Bitcoin and Ethereum will no longer be subject to double taxation if legislation introduced last week into the Federal Parliament is successful.
Treasurer Scott Morrison says the proposed change will “further cement Australia’s reputation as a global Fintech centre”.
The legislation follows a promise the federal government made in the 2017 Budget, when it pledged to exempt purchases of digital currencies from the goods and services tax (GST) from July 1.
The promise followed on from a statement by the Treasurer in March 2016, committing the government to addressing the issue.
The legislative changes mean digital currencies, such as Bitcoin and Ethereum will be treated similarly to ordinary currency for GST purposes.
Under current arrangements, digital currencies are considered to be intangible property for the purposes of the GST, which can mean that people who use digital currencies to make purchases effectively pay the tax twice: first when purchasing digital currency, and again when using it to exchange other goods and services that are subject to GST.
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.
That means that if you’re acquiring digital currency, you won’t be charged GST 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.
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