In a positive sign for financial technology startups, a government inquiry has set the stage for the digital currency Bitcoin to be treated like a regular currency in Australia.
A Senate Economics References Committee review into digital currencies in Australia has found they should be treated like any other currency for the purposes of the Goods and Services Tax (GST), the Australian Financial Review reported.
The result is a rebuff to the position of the Australian Taxation Office (ATO), which ruled in 2014 that Bitcoin was “neither money nor a foreign currency” and was liable for the GST, as well as other taxes.
The ATO’s guidance was met with dismay by Australia’s nascent Bitcoin business community last year, with many startups warning they would have to move overseas to avoid the debilitating financial penalty.
Labor Senator Sam Dastyari told the Financial Review he hoped the change would help keep digital innovators at home in Australia.
“Without a doubt, the main benefit will be the confidence and certainty that removing a GST will provide to our own digital entrepreneurs, and the foreign businesses who want to set up here,” he said. “Most importantly, it will send the message to local tech entrepreneurs that their government is listening to them, and that in itself is a major step forward.”
The committee received submissions from 48 groups and individuals, including Ripple Labs, an online payment transfer company that is currently working with the Commonwealth Bank of Australia. In its submission, the company said the lack of global uniformity in the regulation of digital currencies is creating serious uncertainty for the fintech industry.
“Harmonizing a global standard for digital currencies could provide clarity and an even playing field for technologists and companies that innovate using digital currencies,” the company wrote.
The senate committee has flagged that more work needs to be done before the digital currency can be properly handled by the Australian Securities and Investments Commission and other regulators, according to the Financial Review, among other recommendations.
The report is a step towards bringing Australia in line with the UK in the regulation of digital currencies. In 2014, the UK indicated it would treat Bitcoin similarly to other currencies and money. In the U.S., the Internal Revenue Service has ruled for tax purposes, Bitcoin is property and not a currency.
The report is expected to be tabled in the senate on August 10. Read more…