21 Aug 14 4 draft Determinations, one draft GST Ruling and a guidance paper released on Bitcoins
On 20 August 2014, the ATO released for public consultation by 3 October 2014 the following 4 draft Taxation Determinations dealing with Bitcoins:
- TD 2014/D11 Income tax: is Bitcoin a 'foreign currency' for the purposes of Division 775 of the Income Tax Assessment Act 1997 (ITAA 1997)? [No]
- TD 2014/D12 Income tax: is Bitcoin a CGT asset for the purposes of subsection 108-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997)? [Yes]
- TD 2014/D13 Income tax: is Bitcoin trading stock for the purposes of subsection 70-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997)? [Yes]
- TD 2014/D14 Fringe benefits tax: is the provision of Bitcoin by an employer to an employee in respect of their employment a property fringe benefit for the purposes of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986? [Yes]
Also on 20 August 2014, the ATO released for public consultation by 3 October 2014 the following draft GST Ruling:
- GSTR 2014/D3 Goods and services tax: the GST implications of transactions involving bitcoin
The draft GST Ruling states:
"5. A transfer of bitcoin is a 'supply' for GST purposes. The exclusion from the definition of supply for supplies of money does not apply to bitcoin because bitcoin is not 'money' for the purposes of the GST Act.
6. The supply of bitcoin is not a 'financial supply' under section 40-5. Further, it is not an input taxed supply under paragraph 9-30(2)(b).
7. A supply of bitcoin is a taxable supply under section 9-5 if the other requirements in section 9-5 are met and the supply of bitcoin is not GST-free under Division 38 (for example, as a supply to a non-resident for use outside of Australia). A supply of bitcoin in exchange for goods or services will be treated as a barter transaction." (Footnotes omitted.)
Also on 20 August 2014, the ATO released a guidance paper entitled "Tax treatment of crypto-currencies in Australia – specifically bitcoin".
Finally, and also on 20 August 2014, the ATO issued a media release which states, in part, as follows:
"Under the guidance paper and rulings, bitcoin transactions are treated like barter transactions with similar taxation consequences.
Generally, there will be no income tax or GST implications for individuals if they are not in business or carrying on an enterprise and they pay for goods or services in bitcoin.
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.
Individuals who use bitcoin as an investment may be subject to capital gains tax rules when they dispose of it, as they would for shares of similar assets.
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."