Australia just passed a law which will remove the current law that imposes a double taxation on all cryptocurrency transactions. The law is set to implement by July 2018.
According to the current law that was created in December 2014, all Australian citizens were subject to a double taxation for any cryptocurrency transaction conducted. The first taxation, was for the goods and services tax (GST), while the second tax was for the actual cryptocurrency involved in the transaction. The Australian Tax Office defined cryptocurrencies such as Bitcoin as “intangible” property when creating the rules pertaining to it.
CEO of the Australian bitcoin startup, Living Room of Satoshi, Daniel Alexiuc, explained that once an individual pays $4 for coffee using Bitcoin, essentially they pay an extra 40c for GST, and then another 40c just for using Bitcoin.
Despite this counter-intuitive rule, the Australian Treasury has pledged their commitment to finding a better solution for the issue of double taxation. To this end, they released a comprehensive policy titled “Australia’s FinTech Priorities” early last year. In the policy, the Australian Treasury stated that the government is committed to finding a more suited alternative that the current double taxation on cryptocurrencies transactions. The policy suggested that they will reform the law pertaining to GST especially in terms of cryptocurrencies.
The government had also demonstrated that they are truly committed to this cause when they once again addressed this issue in this year’s federal budget.
During September the government introduced the initial bill in an attempt to rectify the current legislative framework which imposes a double taxation on cryptocurrencies. According to The Australian, the bill has been approved by the Australian parliament. According to the Bill, cryptocurrencies will from now on be seen and handled as “foreign currency.”
Ending the double taxation is bound to give cryptocurrency activity a major boost in the country. In addition, the Australian Tax Office has also confirmed that they will investigate the growth of cryptocurrencies as well as blockchain technology to implement into the taxation system, in an attempt to streamline the process.
According to Kevin Hogan, chair of Australia’s House of Representative Standing Committee on Tax and Revenue in New South Wales, since cryptocurrencies are clearly increasing in popularity, the onus rests on governmental and financial institutions to implement regulatory and legislative frameworks that will encourage and monitor the activity. The taxation method is just a part of the larger process.