Posted on 25 August '14 by , under Tax.
The ATO has issued its decision on the treatment of bitcoin, and other crypto-currencies, for tax purposes. Bitcoin is a form of virtual digital currency that has been gaining popularity worldwide. Based on the average number of daily transactions, bitcoin has overtaken western transfer and is fast approaching PayPal as the world’s most popular form of online transaction.
Bitcoin is unregulated and operates outside of the global financial system. The ATO has ruled that making purchases with bitcoin essentially amounts to bartering, and as such the virtual currency will be treated as an asset, rather than as money, for tax purposes.
In the eyes of the ATO, bitcoin will be treated similarly to shares. There is no need for individuals to declare bitcoin to the ATO until they dispose of it, in which case it may be be subject to capital gains tax. Individuals may also use bitcoin to purchase up to $10 000 worth of personal items, and it will be considered as personal assets use. If an employee receives bitcoin as part of their remuneration package then this may be subject to fringe benefits tax.
Bitcoin enthusiasts across the country have expressed disappointment in the decision, claiming that it will drive investment in bitcoin offshore, and cut Australia our of the emerging digital currency economy.