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Tuesday, 9 December 2014

ATO sets guidelines on Bitcoins and other crypto-currencies

Generally, the Tax Office does not consider Bitcoins to be money, foreign currency nor a form of financial supply for GST purposes but instead views it to be an asset for capital gains tax purposes.

Capital events arising from the disposal of Bitcoins by individuals for personal consumption is disregarded provided that the cost of the Bitcoins is $10,000 or less.

However, individuals who purchase Bitcoins as a form of investment may be subject to capital gains tax upon disposal.

Businesses receiving Bitcoins as a form of payment for goods and services have to record ordinary income at the fair value obtained from a reputable Bitcoins exchange. Similarly, businesses are entitled to a deduction based on the fair value if business items are purchased using Bitcoins.

Any GST charged when receiving Bitcoins as payment can be claimed if the underlying supply of goods and services is a taxable supply.

Businesses dealing with Bitcoins for profit-making undertaking, such as the mining of Bitcoins, conducting Bitcoins exchange or providing Bitcoins ATMs, will need to treat Bitcoins transactions as assessable income and are required to account for them as trading stock at year end.

Finally, fringe benefits tax may apply if Bitcoins are used to remunerate an employee under a valid salary sacrifice arrangement. Under other circumstances, Bitcoins are treated as normal wages and are subject to PAYG withholding.

For more information, click here.