Individuals using Bitcoin for personal consumption will welcome the conclusion that there will be no income tax or GST implications provided the Bitcoin is a personal use asset (i.e. has a cost base of less than $10,000). The capital gains tax (CGT) provisions will apply in other cases (TD2014/D12).
Business to business transactions will be treated as barter transactions consistent with IT 2668. Complexity for business arises from the supply of Bitcoin being a taxable supply for GST purposes. A supply of goods or services that is settled by Bitcoin will require reciprocal tax invoices between the parties together with the associated recording and reporting obligations (GSTR2014/D3).
The Bitcoin industry will be disappointed but should not be surprised by the position adopted by the ATO that gains and losses from the creation, acquisition and disposal of Bitcoin will be subject to the ordinary income and deduction provisions (or the trading stock rules - see below). This is consistent with a number of private rulings issued to industry players by the ATO.
In addition to the above, the ATO has ruled that:
- Bitcoin provided in substitution for salary or wages under a salary sacrifice arrangement will be subject to fringe benefits tax. Salary or wages otherwise settled in Bitcoin will be subject to the usual pay-as-you-go (PAYG) withholding obligations (TD 2014/D14)
- Bitcoin can be trading stock (TD 2014/D13)
- Bitcoin is not foreign currency (TD 2014/D11).