In a draft ruling, the tax office has clearly stated it does not consider bitcoin a currency, instead it considers a bitcoin transaction akin to a barter transaction, with similar tax consequences.
Taxpayers Australia has used a submission to the government to call for cryptocurrencies to be considered a ‘foreign currency’ for the purposes of Division 775 of the ITAA 1997.
“For the purposes of Division 775, ‘foreign currency’ means ‘a currency other than Australian currency’ (s 995-1 of the ITAA 1997). The question is whether bitcoin is ‘currency’ for the purposes of s 995-1,” the submission read.
“We consider that bitcoin is ‘currency’ taking into account the ordinary meaning, legislative context and legislative purpose.”
Taxpayers Australia’s Head of Tax Mark Chapman, said: “The tax office is taking a stance on bitcoin that is wilfully out of step with economic reality.”
“Already tens of thousands of Australians are using bitcoin as money, and with plans advanced for up to 100 bitcoin ATMs to be rolled out across the country, that number can only increase,” Mr Chapman said.
“By taking an excessively legalistic view of what constitutes ‘money’ and ‘currency’, the tax office is ignoring the economic substance of bitcoin transactions.”
“By running the argument that bitcoin is not yet commonly in use as currency in the community, the tax office is leaving itself exposed to a requirement to change the law whenever bitcoin usage reaches the tax office's arbitrary threshold for ‘common usage’,” Mr Chapman said.
Tony Greco, the IPA’s senior tax adviser told AccountantsDaily he was happy with the ATO’s interpretation of cryptocurrencies.
“It’s not currency as we normally define it and so by default I think you have to accept the ATO's position.”
Mr Greco warned the ATO’s stance could cause some complications for businesses undertaking bitcoin transactions and their advisers.
“Unfortunately, it can get fairly messy when it’s not treated like normal currency. It has different treatments for tax and GST and also for fringe benefits,” Mr Greco added.
Paul Drum, head of policy at CPA Australia said the industry body has taken a look at it from an accounting point of view and believes it should be considered an intangible asset.
“It has an element of being a financial instrument, it’s not cash, it’s not a currency, could be a financial instrument but it’s more like an intangible asset.”