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What is the hottest topic these days in money market? Bitcoin of course.

So, how is it taxed by ATO? If you think that it is out of the tax system, you are totally wrong. Yes, there are rules about that too.

From ATO’s point of view, Bitcoin is an asset for Capital Gains Tax (CGT) purpose.

First of all you need to keep a record of,

The date of your bitcoin transactions

The amount in Australian dollars

The purpose of transaction

Who the other party was

If you use the bitcoin to buy goods and services, like you do with real money, there is not tax for the gain or loss from disposal of bitcoins, as long as the cost of bitcoin is less than $10,000.

Secondly, if you receive bitcoins for the goods or services you provided, the business may be charged GST on bitcoins.

A third scenario is about the employees who have valid salary sacrifice agreements with their employers, to receive bitcoins as remuneration instead of Australian dollars. In this case, the payment of the bitcoin is a fringe benefit and the employer, is subject to the provisions of the Fringe Benefits Tax Assessment Act.

The fourth case is bitcoin mining. When you are in the business of mining bitcoin, any income you derive from the transfer of the mined bitcoin to a third party would be included in your assessable income and relevant expenses are deductible. For you, bitcoins are trading stocks. Remember, GST is payable on the supply of bitcoin you mined.

When you are carrying on a business of buying and selling bitcoin as an exchange service, the proceeds you derive from the sale of bitcoin are included in your assessable income. Any expenses incurred in that respect, are allowed as a deduction. Again, in this business, bitcoins are your trading stocks. And the GST is applied too.

Lastly, if you just invest on bitcoins and dispose them after a while to make profit, you will pay capital gains tax in the same manner that you sell any other investment.

For more information, please contact our office.

Source: ATO website.