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The tax office has delivered its final rulings on the tax treatment of cryptocurrencies, including bitcoin.
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ATO announces final guidance on bitcoin
30 December 2014
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A statement released by the ATO outlined the tax office’s final position.
“There will be no income tax or GST implications for individuals if they are not in business or carrying on an enterprise and they simply pay for goods or services in bitcoin,” it said.
“Where an individual uses bitcoin to purchase goods or services for personal use or consumption, any capital gain or loss from disposal of the bitcoin will be disregarded – as a personal use asset – provided the cost of the bitcoin is $10,000 or less.”
The tax office stated that the final rulings provide additional clarification in relation to:
• income tax consequences of bitcoin not being foreign currency for income tax purposes;
• the interaction between income tax provisions and capital gains tax provisions;
• factors that are relevant to determining whether bitcoin is a personal use asset for capital gains tax purposes;
• circumstances in which bitcoin will be considered held as trading stock by a business;
• when bitcoin transactions will give rise to GST consequences;
• whether bitcoin is second-hand goods, a voucher, or a taxable importation.
Under the ruling, businesses will need to record the value of bitcoin transactions as a part of their ordinary income. They must also charge GST when they supply bitcoin and may be subject to GST when receiving bitcoin in return for goods and services.
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Record-keeping requirements are similar to other transactions. Where there may be a taxation consequence, the tax office said people should keep records of:
• the date of the transaction;
• the amount in Australian dollars;
• what the transaction was for; and
• who the other party was (even if it is just the bitcoin address).
The tax office also said there will be fringe benefit tax consequences for businesses using bitcoin to pay some or all of employee salaries or remuneration under a salary sacrifice arrangement.
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