Goods and Services Tax (GST) and Digital Currency

Goods and Services Tax (GST) and Digital Currency

Digital Currency for Individual Use

The laws changed on 1 July 2017. Prior to this change, the ATO taxed people who used Bitcoin twice. The first time occurred when people actually purchased the digital currency, and the second taxation occurred when they used the digital currency to purchase services or goods that were subject to GST. With the new changes, purchases of Bitcoin or other digital currencies are no longer subject to GST. Keep in mind, this also means you also won't be eligible for GST credits for any digital currency purchases. There are no GST penalties for purchasing or selling your Bitcoin or using it in the form of payment, as long as it doesn't relate to a business. If it relates to your business, there are a few more regulations you have to pay attention too.  


Digital Currency for Business Use

If your business has $75,000 or more in GST per the calendar year, the ATO requires you to register for GST. It is important to note that this $75,000 doesn't include input taxed sales because Bitcoin counts as input taxed sales. So, if your business's only sales are the digital currency, the ATO doesn't require you to register for GST. You can still choose to register for GST with the ATO if the following applies: 

  • You had increased time and cost due to reporting and record keeping.
  • GST applies to taxable sales so you could still claim GST credits for any creditable items your business purchases.

If your business turnover falls under $75,000 per the calendar year and you choose not to register for GST, or if your business only makes input taxed sales on Bitcoin, you don't have to do anything where GST is concerned. However, your normal income tax rules still apply to your business.

Foreign Money Exchange Rates

According to the ATO, as of 1 July 2003, all foreign income, tax paid, and deductions are required to be converted into Australian dollars before you include them on your tax return. The ATO will require you to convert any foreign cash either at the average rate or at the prevailing rate at the time of the transaction. Bitcoin doesn't count as a foreign currency or as money. This can be confusing, especially if it's your first year utilising Bitcoin in your business transactions. Let the friendly and professional staff at tax accountant Parramatta help you with your taxes this year. We'll ensure that you lodge them correctly and in a timely manner. Contact us today!