11 things you need to know about the ATO’s bitcoin guidance

Here are 11 key points from the ATO’s guidance on bitcoin released on Wednesday from McCullough Robertson senior Associate Reuben Bramanathan and Amor Sexton of Adroit Lawyers.

1. Bitcoin is not money and is not a foreign currency.

2. Whenever an Australian business sends bitcoins to another Australian resident (for example, as an exchange for Australian dollars or as payment for good or services), it must report and pay GST on the gross value of the bitcoins.

3. Australian bitcoin exchanges will need to increase the price of the bitcoins they sell by 10% to account for the GST.

4. Capital Gains Tax applies whenever an Australian resident sends a bitcoin to another person – but there is an exemption for personal use in some situations.

5. Bitcoin transactions are exempt from capital gains tax if:

• Bitcoins are used to pay for goods and services for personal use – e.g. Expedia hotel bookings, or at a café which accepts bitcoins; and

• The cost of the bitcoins used to pay for the transaction is less than $10,000.

6. The capital gain is calculated as the increase in value of the bitcoins between the time they were acquired and the time they were disposed of.

7. Bitcoins held for investment (not trading) will be exempt from income tax, but will be subject to capital gains tax.

8. Capital gains tax will always apply when bitcoins are sold (as opposed to spent).

9. Australians carrying on a business of bitcoin mining must pay income tax when they sell or transfer bitcoins that they have mined.

10. Bitcoins are considered trading stock when held by a person in the business of bitcoin mining, bitcoin trading or a bitcoin exchange, and must be accounted for annually.

11. People dealing with bitcoins need to keep the following records:

• The date of each transaction.
• The amount in Australian dollars at the time of the transaction (which can be taken from a reputable online exchange).
• What the transaction was for.
• Details of the other party (the bitcoin public address is enough).