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​Bitcoin is not money according to ATO

The world's leading cryptocurrency has become a little less cryptic as the Australian Taxation Office rules how Bitcoin is to be treated under tax law.

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Bitcoin

In a sign that cryptocurrencies are no longer just the domain of the online avante-garde, the Australian Taxation Office has officially announced guidance for the tax treatment of Bitcoin in Australia.

After documents revealed last month showed the ATO was working on a framework for the digital currency, the ATO has now deemed that "Bitcoin is neither money nor a foreign currency" and that transacting with the cryptocurrency is akin to a barter transaction, with similar tax consequences.

There are "no income tax or GST implications for individuals" using bitcoin if they're not using it for business purposes, but if they pay for goods or services (such as buying a coffee), they'll still need to pay the GST on that product, as they would as if they'd paid with cash. Capital gains or losses are also disregarded by the ATO if an individual is working with less than $10,000 in bitcoin.

In an interview with the ABC, ATO senior assistant commissioner Michael Hardy said the tax office had arrived at the determination by following existing taxation law.

A simple explanation is it's just like barter for GST [purposes] and it's just like any other sort of asset for income tax and capital gains, which are fairly well long-standing positions in the law. The novelty of Bitcoin gives a little bit of extra interest, but it's a pretty conventional application of existing law.

People just using it...for a bit of interest, they'll get charged GST when they buy things, as they would with anything else, but there's no tax consequences for them to be concerned about. Businesses -- and particularly businesses actively involved with bitcoin -- they will have some taxation consequences and we'll try to give them clarity on how to deal with them.

According to Hardy, there are roughly 1,000 businesses in Australia that currently accept cryptocurrencies, as well as enthusiasts and hobbyists that use them. And while Bitcoin is not money, it's treated in a similar way to cash when it comes to tax fraud.

[Bitcoin] is pseudo-anonymous, it's certainly no more anonymous than physical cash -- we've been dealing with physical cash for a long time, we've got techniques to deal with physical cash if people want to engage in tax evasion so we're not excessively concerned about that.

But our view is most people try to do the right thing, just need to know what's the way the tax office likes it to be treated and they try to sort of fit in with that position.

The ruling from the ATO follows moves by the Japenese government to keep Bitcoin on the fringes of the financial world, ruling that it is not a currency and forbidding commercial banks from providing the digital currency to customers.