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Australian Government Seeks To Remove Double Taxation Of Digital Currencies
The Australian Government has outlined a clear strategy and agenda for FinTech, based on the issues identified by the sector, in its FinTech statement – Backing Australian FinTech – released on 21 March 2016.
The statement identifies priorities for the development of a strong and competitive FinTech industry. This includes the government’s commitment to address the ‘double taxation’ of digital currencies under the goods and services tax (GST).
The statement builds on the earlier announcement about the establishment of a FinTech Advisory Group to advise the Treasurer on issues important to Australia’s FinTech industry. The FinTech Advisory Group will identify areas of potential reform, including in relation to digital currencies, and ensure that the specific priorities of industry are considered in the implementation of government policies.
Last week, the government’s response to the Senate Economics References Committee Report on digital currency, was published, which highlights the government’s intention to engage the FinTech Advisory Group in the development and implementation of its responses:
Digital currency should be treated as money: The committee recommended treating digital currency as money for the purposes of the goods and services tax. It recommends that the government consults with the states and territories to consider amending the definition of money in the A New Tax System (Goods and Services Tax) Act 1999 and including digital currency in the definition of financial supply in A New Tax System (Goods and Services Tax) Regulations 1999.
In this context, the government agrees that consumers should not be subject to the GST twice when using digital currency to purchase goods or services. It has already committed, through its Backing Australian FinTech statement, to address the ‘double taxation’ of digital currencies. It is working with the FinTech Advisory Group on options to reform the current GST treatment of digital currencies and has released a consultation paper for public consideration as part of the 2016‑17 Budget. Any change to the GST treatment of digital currencies is subject to formal state and territory agreement.
Further examination of appropriate tax treatment of digital currencies: The committee recommended that further examination of appropriate tax treatment of digital currencies should be included in the taxation white paper process, with particular regard to income tax and fringe benefits tax.
The government noted this recommendation and said that together with the Australian Taxation Office (ATO), it will continue to monitor developments in the digital currency industry in order to consider the most appropriate tax treatment of digital currencies.
Establishment of a Digital Economy Taskforce: The committee recommended that the Australian government should consider establishing a Digital Economy Taskforce to gather further information on the uses, opportunities and risks associated with digital currencies. This will enable regulators, such as the Reserve Bank of Australia and ASIC, to monitor and determine if and when it may be appropriate to regulate certain digital currency businesses. In addition, the committee supports ADCCA’s continued development of a self-regulation model, in consultation with government agencies. The government agreed with this recommendation.
AML/CTF regulations for digital currency exchanges: The committee recommended that the statutory review considers applying anti-money laundering and counter-terrorism financing (AML/CTF) regulations to digital currency exchanges. The government agreed with this recommendation.