The Australian government has revealed that it will align the GST treatment of digital currency, including Bitcoin, with regular money as of July 1, 2017 -- which it said will promote the growth of the fintech industry.
"Digital currency is currently treated as intangible property for GST purposes. Consequently, consumers who use digital currencies as payment can effectively bear GST twice: Once on the purchase of the digital currency and again on its use in exchange for other goods and services subject to GST," the government said in its 2017-18 Budget on Tuesday.
"This measure will ensure purchases of digital currency are no longer subject to the GST. Removing double taxation on digital currencies will remove an obstacle for the Financial Technology (Fintech) sector to grow in Australia."
The government had in March announced plans to remove the double tax treatment from digital currency, with its report [PDF] Backing Australian FinTech saying that those using the digital currency to buy anything should not be taxed twice.
This followed the Australian Senate Economics References Committee in August saying the GST treatment of digital currencies is one of the most pressing concerns for Australian businesses that are using currencies such as bitcoin, and called for changes to the GST Act to amend the definition of money.
In the committee's report, it said current ATO treatment of bitcoin made it uncompetitive for digital currency companies to compete in Australia against non-Australian rivals.
"The committee is of the view that digital currency should be treated as money for the purposes of the goods and services tax," the report said.
In addition to dealing with the double taxation on digital currency purchases, the government's actions to support the fintech industry include ensuring access to concessional tax treatment for venture capital investments in startup fintech firms, as well as commissioning the Productivity Commission to outline options to increase data availability and access to facilitate new products and better consumer outcomes.
The government will also work with the fintech industry on more reforms to allow for changes to be made to the Crowd Sourced Equity Funding framework it published last year.
It will also consider increasing the assets and turnover threshold used to determine eligibility for equity crowdfunding to AU$25 million, and reduce the cooling off period for investors into crowdsourced equity funded projects to 48 hours.