A little while ago, several major Bitcoin media outlets reported on how Australia declared Bitcoin as a currency in order to make it taxable. While the exact circumstances were rather unclear at that point in time, a new statement issued by the Australian Taxation Office (ATO) creates some clarity. Yes, Bitcoin will be taxable, but no, it is not a currency.
Bitcoin Is Not Money or a Foreign Currency
Governments all over the world are taking a closer look on how to exactly handle Bitcoin. Is it a currency, is it money, and can it be taxed? The results will vary depending on which country you live in, but Australia is definitely forming its very own opinion regarding Bitcoin. Up until this point, Australia has always been a “safe haven” for Bitcoin and other digital currencies.
In fact, one could go as far as saying that Australia has favored crypto-related startups , as well as attract digital currency companies overseas. Most of this can be attributed to the country’s excellent international reputation and stability on legal, economical and political fronts. Bitcoin could potentially disrupt that stability if there would be no form of legislation.
As part of this regulation, the Australian Tax Office (ATO) released “digital currency guidelines” in December of 2014, which include the taxation of Bitcoin or other digital currencies similar to non-cash barter transactions. Needless to say, the general digital currency community was not too pleased with these “guidelines”, as they feel this would hinder the natural growth and development of Bitcoin in Australia.
Furthermore, these “guidelines” raised more questions than answers, which meant the ATO was not on the right track at that point in time. To make matters even worse, the ATO’s statement instilled fear regarding the growth and potential of Bitcoin and digital currency-related businesses located in Australia.
A new statement issued by the Asstralian Tax Office states how a 10% income tax or goods & services taxes (GST) is applied on any single Bitcoin transaction of $10,000 or more. Individuals involved in Bitcoin mining are subject to these same fees to paid on any income gained from selling the mined Bitcoins, which is to be considered a taxable income.
Digital Currency-related Companies Halting Operations
Even though Australia was considered very friendly towards digital currency companies and startups, this new regulation is turning things around dramatically. Granted, there are still roughly 1,000 Australian businesses accepting Bitcoin at this point in time.
Unfortunately, several companies have ceased their operations already and are looking for a new “safe haven” to conduct their business. CoinJar, one of the most well-known Australian Bitcoin companies, recently relocated to the United Kingdom because of their “more favorable Bitcoin conditions”. Keep in mind there are other less fortunate businesses caught up in this new regulation,such as Living Room of Satoshi which ended its operations completely.
Several Australian cities are still in the top 5 of places with the most retailers accepting Bitcoin payments. Melbourne, Brisbane and Sydney are just a few of the places where Bitcoin-related companies are still flourishing as of this writing. Given the new ATO regulation however, that landscape could change drastically during 2015.
Guidelines Are Not Affecting Everyone
On the bright side, these new Australian Taxation Office guidelines will not affect every individual in Australia. Bitcoin enthusiasts making occasional purchases or exploring the Bitcoin mining business will not be looked at by the ATO at this time. Individuals and companies aiming to make a (healthy) profit from Bitcoin on the other hand, will see the new regulations enforced upon them by the ATO (assuming transactions exceed $10,000, that is).
Taxation Liabilities To Be Backdated
The major problem with the new Australian Tax Office guidelines is the fact these taxation liabilities will be backdated to when Bitcoin was created in 2009. To put in simple terms : any transaction exceeding $10,000 in value between 2009 and today will be subject to a 10% taxation, regardless of whether you are an individual or a business.
Ramifications of this procedure are impossible to oversee, as it means the ATO will have a ton of work on their hands going through tons of transactions taking place over the span of more than five years. There is no reason to panic just yet at this point in time, but if you live in Australia, you might want to prepare for the worst.