Matthew Cridland, Taxation Specialist and Partner at DLA Piper, presents his views on the potential Australian treatment of bitcoin from a GST perspective. This view draws on Matthew's consultation with his network of offices, where there have been tax authority rulings from jurisdictions around the world. For advisory, you can contact him directly here: http://www.dlapiper.com/en/australia/people/c/cridland-matthew/ This was presented at the Bitcoin Barcamp in Sydney on 15th March 2014. To view the full talk or find more presentations from Australia's first pop-up unConference on cryptocurrency innovation, go to www.bitcoinbarcamp.org

1. GST & Bitcoins – Potential Pitfalls
Matthew Cridland, Partner
Sydney
14 February 2014

2. AGENDA
§ When does GST apply?
§ Are Bitcoins "money"?
§ Do the foreign exchange provisions apply?
§ Example
§ Practical issues
§ Cross border transactions
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3. § GST applies to "taxable supplies"
GST Act, section 9-5:
You make a taxable supply if:
(a) you make the supply for consideration; and
(b) the supply is made in the course or furtherance of your
enterprise; and
(c) the supply is connected with Australia; and
(d) you are registered or required to be registered.
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When does GST apply?

4. § What is a "supply"?
GST Act, section 9-10:
(1) A supply is any form of supply whatsoever.
(2) Without limiting subsection (1), a supply includes any of
these:
(a) ….
(e) a creation, grant, transfer, assignment or surrender of
any right.
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When does GST apply?

5. § Exclusion for "money"
GST Act, section 9-10(4):
However, a supply does not include a supply of money unless
the money is provided as consideration for a supply that is a
supply of money.
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When does GST apply?

6. § Definition of "money"
GST Act, section 195-1:
Money includes:
(a) currency (whether of Australia or of any other country); and
(b) promissory notes and bills of exchange; and
(c) any negotiable instrument used or circulated, or intended for
use or circulation, as currency (whether of Australia or any
other country); and
(d) postal notes and money orders; and
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Are Bitcoins money?

7. (d) postal notes and money orders; and
(e) whatever is supplied as payment by way of:
(i) credit card or debit card; or
(ii) crediting or debiting an account; or
(iii) creation of transfer of a debt.
However, it does not include:
(f) a collector's piece; or
(g) an investment article; or
(h) an item of numistic interest; or
(i) currency the market value of which exceeds its stated value
as legal tender in the country of issue.
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Are Bitcoins money?

8. § GST does not apply to foreign exchange transactions.
GST Regulations, Reg 40-5.09(3), Item 9:
Australian currency, the currency of a foreign currency, or an
agreement to buy or sell currency of either kind.
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Foreign Exchange Provisions

9. § Coffee Co, a GST registered coffee machine retailer, accepts
Bitcoins.
§ Coffee Co sells a Nespresso coffee machine to Rebecca. The
price is AUD $220. However, Rebecca pays in Bitcoins.
§ The GST payable on the sale is $20 (1/11th of $220).
§ Coffee Co decides to immediately sell the Bitcoins received
from Rebecca. The sale is to an Australian buyer.
§ If that sale is a taxable supply, a second GST liability will arise.
§ The second GST liability would not have arisen if Coffee Co
had accepted AUD.
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Example

10. § Even though Coffee Co receives Bitcoins, it needs to notionally
convert the payment received to AUD so that it can:
§ calculate the GST payable on the sale of the coffee machine; and
§ state the amount of GST on any "tax invoices" that are issued to
customers.
§ Any GST payments must be made in AUD, even if the total
invoice amount is received in Bitcoins.
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Practical Issues

11. § Supplies of rights can be in some instances be "GST-free".
§ GST Act, section 38-190(1) Item 4
"a supply that is made in relation to rights if:
(a) the rights are for use outside of Australia; or
(b) the supply is to an entity that is not an Australian
resident and is outside of Australia when the thing
supplied is done."
§ Travellex Case involving Fijian currency
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Cross Border Transactions