Australian Government Seeks to End Double Taxation of Bitcoin

The Australian government has announced it will support legislation around the taxation of bitcoin , in what is being seen as a broad political statement on its attitude towards financial technology.

Under the country's tax guidelines, bitcoin is considered a physical transaction rather than a form of currency. Digital currency transactions in Australia are subject to the Goods and Services Tax, which is levied again when purchasing with bitcoin.
The policy has sparked widespread criticism in the Australian startup community, which sees it as creating an unfair tax environment. Last year, the Australian Senate called for a bill to address the issue in a report on digital currencies.

The Australian government released a statement today saying it will work with the Australian digital currency industry to find a solution, saying:

“The government has found that under the current excise tax system for digital currency, when consumers use digital currency to pay for goods subject to excise tax, they are effectively paying tax twice. The government is committed to working hard to address the double taxation of digital currency. On relevant legislative options, the government will work with relevant industries to reform the relevant legislation for excise tax on digital currency.”

According to the Australian Financial Review, Australian Treasurer Scott Morrison mentioned that the current Australian government will “not impose taxes on digital currencies.”

The announcement was made by the Australian government in a broader policy statement on Fintech Australia, which provides more details on how the government will regulate companies working on new financial technologies, digital currencies and, in particular, blockchain technology.

The government wants to relax policies for investors and startups in the fintech sector, and startups will have great flexibility under the "regulatory sandbox" system.

“The removal of double taxation on digital currencies and appropriate anti-money laundering and financial counter-terrorism policies will promote further development and application in the future,” the government mentioned.

Legislative plan for the ledger account

Australia’s anti-money laundering regulator, AUSTRAC, has expressed support for blockchain technology in a policy statement, saying it believes the technology could “significantly reduce coordination and regulatory costs for reporting organizations.”
Tellingly, the regulator said it would seek new financial services rules for regulating ledger accounts.

“Using encryption, this new technology will ensure that sensitive financial data used for intelligence purposes is secure, transparent and protected,” AUSTRAC said, going on to explain:

“For such a resilient system to be exposed to systemic risk and criminal attack, two complementary regulatory approaches are required: a highly sophisticated guiding legislative framework; and a set of algorithmically enforced rules coded in software.”

AUSTRAC did not indicate an exact timeline for when these new rules could be advanced, noting that stakeholder engagement would be part of the process.

Government debates AML (anti-money laundering) rules

In other policy releases, the government noted that it will continue to weigh whether to apply financial regulation rules to digital currency exchange services in the country.

According to the published policy, the Australian judicial department is evaluating whether the existing anti-money laundering (AML) and know your customer (KYC) policies need to be revised for domestic transactions. This move indicates that all financial startups in Australia will apply these rules.

“The current review of Australia’s anti-money laundering and counter-terrorist financing (AML/CTF) regime is considering options to support the growth of the fintech sector,” the government said. “The review is considering whether AML/CTF regulation could be extended to include convertible digital currency transactions.”

The government office said it was “considering how to make the role of technology in the AML/CTF regime more neutral” and planned to submit a report on possible solutions to the Australian Attorney-General’s Department.

Blockchain support

The Australian government has mentioned that it is looking for business areas that can develop and apply financial technology, and specifically mentioned that there is growing interest in blockchain technology among the Australian business sector.

The government said the Australian Securities Exchange was looking at opportunities for adoption for its market organisation and recent investments in digital asset holding start-ups in the blockchain sector.

The government said:

“At this early stage of its development, technology has the potential to greatly simplify the end-to-end operation of our markets, which will benefit investors, participants, regulators and government agencies.”