Bitcoin, digital currencies

Paying tax on Bitcoin investments or trading

As part of the 2017-18 Budget, the Government announced it would remove the double GST taxation of digital currency from 1 July 2017.

GST does not apply to money. Treating crypto currencies as money would therefore remove the GST implications on bitcoin.

See GST – removing the double taxation of digital currency.

From 1 July 2017, digital currency is treated like money (for GST purposes).

Legislation giving effect to these changes:Treasury Laws Amendment (2017 Measures No. 6) Bill 2017

Digital currency amendments

How Bitcoin is taxed

Some think that Bitcoin is better than gold and the USD. The rapid increase in attention to cryptocurrencies has been noticed by tax authorities around the world.

In Australia Bitcoin is now treated like money for GST purposes, but for income tax (including CGT) purposes, the general rules apply.

What happens to digital currency profits for tax purposes?

Answers to this question depend on why the Bitcoin was acquired and how it was used.

Potential tax outcomes include –

  • the profits are 100% taxed (e.g. a person acquires bitcoin with the intention of speculating that the price will increase)
  • 50% of the profits are taxed (e.g. CGT rules apply, owned for more than 12 months)
  • profits are tax free (e.g. it’s a ‘personal use‘ asset under the CGT rules)

See article “Taxation of Bitcoin in Australia” by Drew Pflaum, Munros Accountants and Business Advisors.

Personal use assets acquired for less than $10,000 are disregarded for CGT purposes. The mere act of mining a bitcoin is not automatically considered by the Tax Office to be a profit-making venture; on a small scale it can be simply a hobby.

Regulation of digital currencies

Concerns about money-laundering and the deployment of cryptocurrencies in criminal conduct, has led Australian authorities to regulate its use.

A loophole in the definition of currency has hitherto allowed cryptocurrencies to escape the Austrac oversight which applies to financial services. Regulations are designed to detect material movements of money, look through shields of anonymity and track proceeds of crimes.

The Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2017  approved by the federal parliament expands (amongst other purposes) the scope of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 to include digital currency exchange providers. The old definition of “e-currency” is replaced with an expanded definition of “digital currency”.

See further

This page was last modified 2021-06-02