Australian Government Seeks Ways to End Double Taxation of Bitcoin

Author: Mia

The Australian government has announced that it will support legislation to address bitcoin taxation as part of its policy on fintech.

Under current Australian tax guidelines, bitcoin is considered a form of barter rather than a currency. Australian businesses that want to sell digital currencies must pay value-added tax, and if they use digital currencies for payment, they must also pay tax.

The policy has drawn widespread criticism in the Australian startup community as many believe it creates an unfair tax environment. Last summer, the Australian Senate called for addressing the issue of digital currencies in a report.

The Australian government said today that it would work with the Australian digital currency industry to find a solution to the problem. The Australian government said:

“The government recognises that the way digital currencies are currently treated under VAT law means that consumers are subject to ‘double taxation’ when they use digital currencies to buy any items already subject to VAT. The government is committed to addressing the ‘double taxation’ of digital currencies and will work with the digital currency industry to develop legislation to address this issue and reform the law relating to VAT, which is applied to digital currencies.”

According to the Australian Financial Review, Australian Treasurer Morrison said today that the Australian government "will not impose taxes on digital currencies."

The statement comes as the Australian government discusses its broader policy on financial technology. It specifically mentions how the government plans to regulate some new financial technology companies, especially digital currencies and blockchain applications.

The government wants to relax regulations for investors and startups in the fintech sector, which will be given some flexibility in the "regulatory sandbox". An advisory group on fintech issues has also been set up, led by Westpac Bank president Craig Dunn.

The Australian government said: "Eliminating the 'double taxation' of digital currency VAT and implementing correct anti-money laundering and counter-terrorist financing rules can accelerate further development in the future."

Legislative plan for the ledger

Australia’s anti-money laundering regulator ATRAC has expressed support for blockchain technology in a policy statement, saying it believes it will “significantly reduce the compliance and regulatory costs imposed on reporting entities.”

In particular, ATRAC said it would develop new rules to control the use of ledgers in the financial services industry.

AUSTRAC said: "This new technology can ensure that sensitive financial data used for intelligence purposes is secure and transparent and protected by encryption technology." AUSTRA went on to explain: "For such a system, in order to protect against systemic risks or criminal behavior, two complementary regulatory approaches are required: one is a high-level guiding legislative framework; the other is a set of ready-made rules to regulate the operations of software coding."

AUSTRAC did not say when these new rules would be drawn up, only that "shareholders" would be involved in the process.

Government debates anti-money laundering rules

In the policy release, the government also stated that it would continue to consider whether to impose financial regulation on Australian digital currency exchange services.

According to the release, the Australian Attorney-General's Department is assessing whether to amend existing anti-money laundering and know-your-customer rules to cover domestic exchanges, a move that would enforce those regulations for all fintech startups in Australia.

The Australian government said: "The current review of Australia's anti-money laundering and counter-terrorist financing rules is considered as a series of measures to support the development of the financial technology industry. The review also considers whether to extend the anti-money laundering and counter-terrorist financing rules to include digital currency exchanges."

The government said it was "considering how to meet its obligations within the technical neutrality of anti-money laundering and counter-terrorist financing rules" and planned to submit a report to the Australian Department of Justice on possible approaches.

Blockchain support

The Australian government said it is seeking support from all parties for financial technology companies, especially mentioning the growing interest of Australian business community in blockchain technology.

The government also mentioned the Australian Securities Exchange, which is investigating possible applications for its market structure and recently invested in blockchain startup Digital Asset Holdings.

“Although still in its early stages of development, blockchain technology has the potential to radically simplify the way our markets operate, with significant benefits for investors, participants, regulators and government agencies,” the government said.

JPM compiled from

Coindesk, Australian Government Seeks End to Double Taxation of Bitcoin, by Stan Higgins.