In October 2014, the Senate commissioned its Economics References Committee to undertake a review of digital currency and focus in particular on developing an effective regulatory regime for digital currency in Australia. Earlier this week, the Committee issued its report following its review.
The potential issues arising from digital currency are far-reaching and touch everything from the most obvious, Australia's banking system, to perhaps the less obvious, Australia's tax system. The particular tax system issues of note are whether a digital currency, the most well-known of these being Bitcoin, is in fact ‘money', or something else, for the purpose of income tax, GST, fringe benefits tax and capital gains tax.
The Tax Institute lodged a submission with the Senate Committee in December 2014 arguing that digital currency should be treated as currency/money for tax purposes.
The Committee has concluded that digital currency should be treated as ‘money' for GST purposes and recommended that further examination of the appropriate tax treatment of digital currencies, with a particular focus on income tax and fringe benefits tax, should form part of the Tax Reform White Paper process. These are both common sense conclusions.
For members interested in reading the whole Committee report, a copy may be accessed here.
Stephanie Caredes CTA is a Tax Counsel of The Tax Institute.