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Australian government moves forward to solve bitcoin double taxation problem
The Australian government in its response to the productivity commission inquiry into business set-up, transfer, and closure, has provided details on its efforts to regulating digital currency business in the country and solving the double taxation problem of digital currencies.
The government said that it believes that appropriate anti-money laundering and counter-terrorism financing (AML/CTF) will aid the development of digital currency sector in the country. According to the document, the extension of AML/CTF regulation to include convertible digital currency exchanges has already been taken in a number of countries including the U.S., the U.K., and Canada, and is in line with the “Guidance for a Risk-Based Approach to Virtual Currencies” issued by the Financial Action Task Force (FATF).
“The Government notes that the regulation of digital currencies was considered as part of the statutory review of Australia’s AML/CTF legislation. The Minister for Justice tabled the report of this review in Parliament on 29 April 2016”, it said. “The statutory review…made a number of recommendations in relation to the regulation of digital currencies. In particular, it recommended that Australia extend AML/CTF regulation to digital currency exchange businesses. The Government will also consider guidance from the FinTech Advisory Group as part of broader considerations around the AML/CTF regulation of digital currencies.”
With regard to the double taxation problem of digital currencies, the government said that it admits that consumers should not be subject to the GST twice when using digital currency to purchase goods or services. On these lines, it supports the recommendation that states:
“Digital currencies, such as Bitcoin, should be treated as a financial supply for GST purposes. This would require that the definition of money be updated to include digital currency in both Division 195 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) and relevant GST Regulations.”
The government said that it has already committed to addressing the double taxation problem through its Backing Australian FinTech statement released in March 2016.
“The Government is working with the FinTech Advisory Group on options to reform the current GST treatment of digital currencies and 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”, it added.