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Author Topic: GST and Tax issues for Bitcoins in Australia  (Read 2572 times)
burtan
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July 31, 2012, 06:25:06 AM
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Hi,

I was wondering if anyone had any info on how GST might affect bitcoins in Australia for the purchase and sale of bitcoins?

I know that Crypto X Change/Mr Bitcoin and spendbitcoins are both not resisted for GST with ASIC. How is this possible?

Is there some loophole that I am not aware of? Surly they must have a turnover of over $50k and if there mark up is only 10% wouldn't that all be eaten up with our 10% GST?

I am asking this question for two reasons.
1) I might personally breach the $50k hobby threshold this financial year
2) If I am trading BTC through a site like Crypto X Change I want to ensure that they are completely above board and wont be shut down by ASIC for tax issues, potentially losing all my money.

Any thoughts?
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zhoutong
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July 31, 2012, 08:43:44 AM
 #2

Hi,

I was wondering if anyone had any info on how GST might affect bitcoins in Australia for the purchase and sale of bitcoins?

I know that Crypto X Change/Mr Bitcoin and spendbitcoins are both not resisted for GST with ASIC. How is this possible?

Is there some loophole that I am not aware of? Surly they must have a turnover of over $50k and if there mark up is only 10% wouldn't that all be eaten up with our 10% GST?

I am asking this question for two reasons.
1) I might personally breach the $50k hobby threshold this financial year
2) If I am trading BTC through a site like Crypto X Change I want to ensure that they are completely above board and wont be shut down by ASIC for tax issues, potentially losing all my money.

Any thoughts?

GST is only charged for goods and services, and the total tax amount for a single good should equal to 10% the total value added for the good. Therefore you don't have to pay GST for buying Bitcoins, but you need to pay GST when you use Bitcoin to buy goods and services from another Australian merchant.

It's like buying USD cash from the bank - you don't pay GST.

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zhoutong
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July 31, 2012, 11:01:14 AM
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So for a sites like Mr. Bitcoin and spend bitcoins they only need to pay GST on their mark up of say 10% on spot price and not the total sale price?

No. GST is not profit tax. It's a value-added tax imposed on consumers. (All businesses pay GST for domestic goods, but eventually they can get credits/refunds and 100% of the GST burden fall on consumers.)

I can't see any GST-applicable products on spendbitcoins at least. For example, if you use Bitcoin to pay bills in Australia, the biller (like Telstra) will actually include the GST in your bill, so no one should ever pay it again. Even for iTunes store, prices of all apps already include GST.

However for my startup, NameTerrific, I will have to charge 10% GST for Australian residents on all domain name purchases. Because the domains will be "consumed" by Australian consumers, rather than being used to exchange for something else.

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burtan
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July 31, 2012, 01:54:53 PM
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But isn't them providing bitcoins a service and GST is charged on all services and the fact that bitcoins are not considered currency could the government also not clam that bitcoins are goods?
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July 31, 2012, 02:03:49 PM
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But isn't them providing bitcoins a service and GST is charged on all services and the fact that bitcoins are not considered currency could the government also not claim that bitcoins are goods?

An interesting point - I think that the status of "virtual commodities" is most likely something that has never actually been tested in law in Australia (and without precedence it is very hard to say how that would be judged although perhaps some case has been brought up by the ATO before?).

If, however, you looked at the buying and selling BTC as being similar to the buying and selling of stocks then there would be no GST but instead tax would be due after any profits made from the sale of the BTC (most likely at your normal income tax rate).

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john1975
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July 10, 2013, 10:07:48 AM
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An old thread, but this is on point >> http://www.youtube.com/watch?v=TQ4UT5n29II
Trillium
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July 10, 2013, 11:30:44 AM
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http://www.afr.com/p/technology/ato_targets_bitcoin_users_oawpzLQHDz2vEUWtvYLTWI

If in doubt, request a private ruling. They are binding and the ATO must follow it for 12 months. http://www.ato.gov.au/Business/Excise/In-detail/Rulings---law/How-to-apply-for-a-private-ruling/

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TradeFortress
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July 10, 2013, 11:41:24 AM
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But isn't them providing bitcoins a service and GST is charged on all services and the fact that bitcoins are not considered currency could the government also not clam that bitcoins are goods?

Providing bitcoins is not a service.
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July 10, 2013, 12:12:09 PM
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Providing bitcoins is not a service.

Indeed GST makes little sense to be applied to bitcoins themselves but makes perfect sense for things like DNS registration or VPS/VPN.

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john1975
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July 10, 2013, 01:16:20 PM
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The issue is this:

- Notwithstanding the name, GST is not limited to "goods and services".  It can apply to a "supply" of things that aren't goods or services, including intellectual property rights, land, etc.

- Anyone that has a Bitcoin in a wallet will tell you that they own something of value (personal property), although a Bitcoin is completely intangible / digital.  A Bitcoin gives you the right to acquire something (or to convert to mainstream currency) in exchange for the Bitcoin.

- The GST legislation deals with payments of "money" by saying that this is not a "supply".  The GST legislation also provides that GST doesn't apply to the foreign currency conversions.

- The problem is that the definition of "money" in the GST legislation may not currently extend to Bitcoins, as Bitcoins are not issued by a country.  The forex rules may not apply for the same reason.

This is not to say that Bitcoins shouldn't be treated in the same way as money / foregin current - just that a Bitcoin may not qualify on the current definitions.

The video raises this at around 1.06 mins onwards.

It may only be an issue for GST registered business though - and for trades done in Australia.  People that aren't registered , or who are trading cross border, probably don't need to worry about it. 
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July 10, 2013, 01:19:59 PM
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Does GST apply to gold or other PMs?

I think that Bitcoin being a "virtual commodity" (if not considered a currency) would probably be closest to those commodities.

Of course as has been stated - a "ruling" can be applied for from the ATO which might help clarify the situation.

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john1975
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July 10, 2013, 01:28:37 PM
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Does GST apply to gold or other PMs?


No - GST doesn't apply to precious metals.  But there is a specific exemption and "precious metals" are defined in the GST legislation to mean (in summary) "gold, silver, platimum or any other substance listed in the GST Regulations".  So that won't cover Bitcoins either.

The legislation could be changed to specifically cover Bitcoins (probably as money, but possibly as a precious metal).  But that would require Government involvement.
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July 10, 2013, 02:24:08 PM
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Slight problem though: the ATO doesn't care what you or I think bitcoin (and the other cryptocoins) are or are not. If they audit you then only their interpretation matters.

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dirtscience
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July 10, 2013, 03:25:09 PM
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Hi,

I was wondering if anyone had any info on how GST might affect bitcoins in Australia for the purchase and sale of bitcoins?

I know that Crypto X Change/Mr Bitcoin and spendbitcoins are both not resisted for GST with ASIC. How is this possible?

Is there some loophole that I am not aware of? Surly they must have a turnover of over $50k and if there mark up is only 10% wouldn't that all be eaten up with our 10% GST?

I am asking this question for two reasons.
1) I might personally breach the $50k hobby threshold this financial year
2) If I am trading BTC through a site like Crypto X Change I want to ensure that they are completely above board and wont be shut down by ASIC for tax issues, potentially losing all my money.

Any thoughts?

I live in Australia and I get them from localbitcoins
john1975
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July 10, 2013, 11:05:43 PM
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Slight problem though: the ATO doesn't care what you or I think bitcoin (and the other cryptocoins) are or are not. If they audit you then only their interpretation matters.

Agreed. Although it is a self-assessed tax, so people will need to form their own view (or go for a ruling) before an audit occurs.

I expect the ATO won't have a problem with people paying GST when they spend or trade Bitcoins!

If the ATO does take the view that GST applies, then a legislative change would be required to change that. The change would involve the Government, on advice from Treasury (not the ATO).
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November 15, 2013, 08:45:17 AM
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Sorry for resurrecting the topic but I am also interested if anyone has an opinion or advice on the GST exposure for a business providing bitcoin/AUD exchange services.
Has anyone run a business and provided Tax Invoices for exchanging AUD/BTC?
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November 15, 2013, 10:11:52 AM
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Ahh GST - I call it Government Sales Tax. The rules of what is taxable make my head hurt sometimes hah

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November 15, 2013, 10:30:01 AM
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Sorry for resurrecting the topic but I am also interested if anyone has an opinion or advice on the GST exposure for a business providing bitcoin/AUD exchange services.
Has anyone run a business and provided Tax Invoices for exchanging AUD/BTC?

Question the matter (in writing) with the ATO and also request a ruling from them on the matter. They are legally binding (for both you and them)..

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peterepeat
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November 15, 2013, 12:55:32 PM
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Sorry for resurrecting the topic but I am also interested if anyone has an opinion or advice on the GST exposure for a business providing bitcoin/AUD exchange services.
Has anyone run a business and provided Tax Invoices for exchanging AUD/BTC?

Question the matter (in writing) with the ATO and also request a ruling from them on the matter. They are legally binding (for both you and them)..

thanks - I will try and broach it first at arms length
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December 05, 2013, 01:01:56 AM
 #20

So I have spoken with a number of decent Australian accountancy firms and they could provide no clear guidance on the subject. I spoke with the ATO yesterday and they were very helpful, but also could not give me an answer. They said I need to submit a private ruling form and go from there.

I'm going to fill the form out and see what they say. It is binding for 12 months from the ruling date. I am more interested though on how much tax I will need to pay on btc withdrawals...
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