On the 20th of August the ATO delivered a guidance on the taxation treatment of Bitcoins. Under the guidance paper and rulings bitcoin transactions are treated like barter transactions with similar taxation consequences.
Generally, there will be no income tax or GST implications for individuals if they are not in business or carrying on an enterprise and they pay for goods and services in bitcoins.
Where an individual uses bitcoin to purchase goods or services for personal use or consumption, any capital gain or loss from disposal of the bitcoin will be disregarded as a personal use asset -provided the cost of the bitcoin is $10,000 or less
Individuals who use bitcoin as an investment may be subject to capital gains tax rules when they dispose of it, as they would for shares of similar assets.
Businesses will need to record the value of bitcoin transactions as a part of their ordinary income. They must also charge GST when they supply bitcoin and may be subject to GST when receiving bitcoin in return for goods and services.
Record-keeping requirements are similar to other transactions. Where there may be a taxation consequence people should keep records of:
- The date of the transaction
- The amount in Australian dollars
- What the transaction was for; and
- Who the other party was (even if it is just the bitcoin address)
There may be fringe benefit tax consequences for businesses using bitcoin to pay employee salaries.
The ATO’s guidance paper, rulings and details on the tax treatment of Bitcoin is available online at ato.gov.au. If you have any other queries please do not hesitate to contact us.
