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RobotMonster [soylentnews.org] writes:

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.

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