Bitcoin is not foreign currency but is an asset subject to capital gains tax, so transacting in bitcoin is similar to bartering, the Australian tax office (ATO) concluded in a package of draft guidance released on August 20.
The ATO said that businesses receiving bitcoin as payment for goods or services should report the fair market value of the bitcoin as ordinary income and may also be charged goods and service tax (GST) on the bitcoin. If the supply of the goods and services was a taxable supply, the business can claim input tax credits on the GST charged. There may also be capital gains tax consequences when businesses dispose of bitcoin, the ATO said.
Individuals that are not in business or carrying on an enterprise that pay for goods in bitcoin will not have income tax or GST consequences. Also, capital gain or loss from disposal of bitcoin will be disregarded provided the cost of the bitcoin is $10,000 or less, the ATO said.
See, GSTR 2014/D3 (on the GST implications of transactions involving bitcoin); TD 2014/D11 (concluding that bitcoin is not ‘foreign currency’ for the purposes of Division 775 of the ITAA 1997); TD 2014/D12 (concluding that bitcoin is a CGT asset for the purposes of subsection 108-5(1) of the ITAA 1997); TD 2014/D13 (concluding that bitcoin is trading stock for the purposes of subsection 70-10(1) of the ITAA 1997 when held for purposes of sale or exchange in the ordinary course of business; TD 2014/D14 (concluding that, when provided by an employer to an employee in respect of employment, bitcoin is a property fringe benefit for purposes of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986; ATO guidance paper
