Last year, Australian Treasurer Scott Morrison promised to swiftly act on changing the goods and services tax (GST) law, in order to end the double taxation of bitcoin and other digital currencies. However, over fourteen months have passed without any legislative progress. Now, the issue is no longer a priority and bitcoin continues to bear GST twice in Australia.
Double GST Treatment of Bitcoin
The Australian Tax Office (ATO) currently does not consider bitcoin and other digital currencies money for GST purposes. Instead, bitcoin is considered “a form of `intangible property`” under the GST act and regulations.
Consumers using bitcoin to pay for other goods and services are effectively “bearing GST twice”, the government describes. Bitcoin users are taxed when acquiring the digital currency, and again when using it to purchase goods and services.
Last Year, It Was a Priority
The government started working with the fintech industry in March 2016 to reform the GST law, with the aim to end the double GST treatment of bitcoin. One solution discussed was to define the digital currency as money under the GST act, which the government agreed to.
Australia’s national fintech industry association, Fintech Australia, provides input into the development of the government’s innovation agenda. Through the association, the fintech community collaborated and drafted a document of recommended reforms. Early last year, the group identified the GST taxation change as a core reform priority. Treasurer Morrison said he would act on it quickly and promised a draft legislation.
A discussion paper outlining the proposed change was published in May. Following this paper, the government received fourteen comment submissions, all in favor of amending the GST act to define bitcoin as money.
This Year – Not a Priority
Over fourteen months have gone by with no legislative progress. Fintech Australia CEO Danielle Szetho told Innovationaus.com publication this week that the fintech community is still eagerly awaiting the draft legislation which Morrison promised. However, so far, there has been no further movement made. “By all accounts the government is still committed to act on the issue, but it is far from a priority”, the publication wrote.
Szetho also noted that changing the definition of Bitcoin is “one of the original priorities we put in the reform paper and one they said yes to. But here we are, 14 months on and still nothing.” Asserting how this act is “a very technical piece of work which no-one could argue with”, she claims “it could be put through Parliament very quickly”. Nonetheless, she describes:
We’ve been told that it is going through but it needs to be prioritised on the agenda, but it just hasn’t. They’re working on it but something else just keeps coming up. We’re a bit disappointed with the delay.
Australia Falling Behind Other Countries
The longer the government takes to amend the GST law, the further Australia falls behind other countries. The European Union had decided back in October 2015 that digital currencies are not to be doubled taxed. The UK also has had a similar policy in place since March 2014. Japan has recently started considering bitcoin a method of payment as well as abolishing consumption tax on acquiring bitcoin. Szetho said:
Australians are early adopters, but the uptake has been limited because no-one is certain about how they might be taxed. It has slowed the adoption of these new currencies in Australia.