blog Those who have been wondering when the Australian Taxation Office would follow the US Internal Revenue Service and make a formal ruling on how cryptocurrencies such as Bitcoin should be taxed now have an answer. According to the Financial Review (we recommend you click here for the full article), the ATO has just opened a review into the issue. The newspaper reports:
“ATO officials will meet several Australian-based Bitcoin-related companies in Sydney on Tuesday, as well as accounting and tax experts, ahead of releasing a draft discussion paper next week. It is expected to make public the taxation guidelines on June 30.”
The issue is not a small one. Although Bitcoin certainly is becoming a widely used currency, followed closely by others such as the Reddit-supported Dogecoin, it’s not one backed by any specific country and, like other such highly liquid types of assets, can be quite volatile. The US decided to treat Bitcoin as property for tax purposes — similar to a stock — which means capital gains taxes would apply.
However, it is also apparent that cryptocurrencies are daily being used to pay for goods and services. Treating Bitcoin and others as a capital asset might make it more difficult for the ATO to collect transaction taxes such as the GST. Then too, analysts have already started pointing out that the rise of cryptocurrencies such as Bitcoin poses a direct threat to existing financial institutions such as Australia’s banks.
The issue will also be particularly pertinent for Bitcoin miners and traders such as digitalBTC, which have already listed on Australia’s Stock Exchange. Man. I would love to see how that company’s annual report would be generated. I suspect it would be quite complex.
What all this means is that the ATO needs to carefully consider how to fit a form of currency explicitly designed to work around flaws in the global monetary system into that system; not an easy task. Personally I suspect that the agency and others globally may take between five and ten years to work our a specific new set of rules for this fast-changing asset class.
Image credit: antanacoins, Creative Commons