from the not-money-unless-there's-tax-to-collect dept.
Australia's ABC reports that the Australian Taxation Office (ATO) will not treat Bitcoin transactions as money, saying Bitcoin or other digital currency payments will be taxed like a non-cash barter transaction.
Local businesses which accept Bitcoin as payment for goods or services had been hoping the internet currency would be treated under tax law as the same as money or foreign exchange. Doing so makes record keeping and taxation requirements significantly easier. It also avoids double taxation as, under the ATO's view, businesses buying digital coins will have to pay GST on the Bitcoin and on the services they offer.
The tax office essentially views Bitcoin transactions in one of two ways. The first is people using Bitcoin occasionally – such as making small purchases or dabbling in digital currency mining or trading. If the purchase amount is less than $10,000, those people will likely be ignored by the ATO. The second group are people who use crypto-currencies specifically for profit or business. The ATO says, for that group, taxes like capital gains, GST or fringe benefits should be paid and records kept – including the date of the transaction, the amount, what it was for and who the other party was.
"It's the law. We don't make it up, we have to look at the existing law that we have," Michael Hardy, a senior assistant commissioner at the Australian Taxation Office, said.
"We explored it [the law] carefully with input from industry experts in coming to this view."
"It just doesn't fit the legal definitions [of money or foreign currency], so we can't pretend that it is something what it's not."
Mr Hardy said for Bitcoin to be treated as money under Australian law, there would have to be a change of the legislation or another country would have to adopt Bitcoin as its national currency.
(Score: 2) by VLM on Wednesday August 20 2014, @04:54PM
"another country would have to adopt Bitcoin as its national currency."
Second Life? Is SL still around?
I have these vague weird memories from 15 years ago of upgrading from windows 98 to W2K on my gaming machine specifically because SL was the first "game" ever to require software more advanced than 98. Recently I ran into something weird on steam that needed more than XP, which jarred that memory loose.
(Score: 3, Insightful) by MrGuy on Wednesday August 20 2014, @05:21PM
I'm fairly certain Second Life would fail the test of being "another country" even harder than Bitcoin dails their test of being money.
(Score: 0) by Anonymous Coward on Friday August 22 2014, @09:17AM
Actually I immediately thought of Sealand, but I don't think Australia acknowledges that as another country either.
(Score: 4, Interesting) by Lagg on Wednesday August 20 2014, @04:58PM
Bwahaha, big words coming from the aussie government.
To be serious though I must wonder if this treatment is partially due to it being treated so much like some kind of stock trade opposed to an actual stable currency. Let's be honest it is rather hard to treat it as one with all of this speculative trading. I tried to get an idea of what exactly the reasoning was from the article besides a vague "tax law mumble mumble" but not having much luck but I'll admit I kind of skimmed it. Anyone familiar with this stuff have an idea?
http://lagg.me [lagg.me] 🗿
(Score: 4, Interesting) by frojack on Wednesday August 20 2014, @05:29PM
If it ever became such that you could commonly, and easily spend bitcoin in restaurants, car dealerships, and grocery stores I'm sure there would be some quick re-assessment.
But the Australian Government is relying on the fact that in meat space, everyone has to convert bitcoin to money somewhere, and THAT conversion is the only thing that matters. Track that as income and you've got all you need.
I suspect they also get to tax the money twice: (Once when fiat currency is first earned, ignore the conversion to bit, and tax again when the bitcoin is converted back to fiat currency).
No, you are mistaken. I've always had this sig.
(Score: 4, Funny) by kaszz on Wednesday August 20 2014, @06:52PM
The Australian tax office will have a rude awaking when persons start to earn, store and spend bitcoins without ever converting it to "money".
(Score: 0) by Anonymous Coward on Wednesday August 20 2014, @06:59PM
Drug purchases usually aren't tracked by the government anyways, so nothing will change.
(Score: 0) by Anonymous Coward on Friday August 22 2014, @09:19AM
That's certainly not due to a lack of the government trying, though.
(Score: 2) by frojack on Wednesday August 20 2014, @07:00PM
Yes, in a couple hundred years, when you can actually BUY enough to survive with bitcoin, perhaps. But there is plenty of time to change the laws should that start happening.
No, you are mistaken. I've always had this sig.
(Score: 2) by kaszz on Wednesday August 20 2014, @07:39PM
Food is a minor expense. If think this shift will turn up earlier than expected. And it will challenge the established flow of securities.
(Score: 1, Informative) by Anonymous Coward on Wednesday August 20 2014, @05:52PM
Couldn't this be construed as 'double taxation'?
The money was earned and taxed (deferred).
Then the remaining money is used to buy either a mining rig and electricity to power it to mine bitcoins *OR* paid to a real money/Bitcoin exchange to get a digital 'wallet' with some Bitcoin in it.
All the real money invested in Bitcoin virtual currency has already been taxed out in the real world.
I suppose as long as you don't cash out your Bitcoins, you can avoid being double-taxed.
But of course this is just an easy way to generate additional revenenue without little or no additional work on the Tax Office's part. :P
(Score: 0) by Anonymous Coward on Friday August 22 2014, @09:30AM
About the mining: That argument is as if a farmer claimed you may not tax his income from selling farm products because, after all, he has invested money to get the seed, bought gas for the machine to put the seed into the ground, paid for fertilizer, etc., all with money that was already taxed. Or, a real miner saying he is not to be taxed for the ore he sells because he paid for the mine and the mining equipment from already-taxed money.
About the investing: I don't know about the rules in Australia, but AFAIK for investments you normally only pay tax for the difference between the buying price and the selling price (IANATA though). If on selling you get more money than you paid for buying, that extra money clearly hasn't been taxed yet (well, you could argue that it has been taxed for the other person, but that's true for every sort of money changing hands).