Australia is making strides towards establishing itself as a leading global financial technology (FinTech) hub and, recently announced a new package aimed at positioning its local FinTech industry as a world leader. To that effect, the Australian government will make it easier for new innovative digital currency businesses to operate in Australia.
From 1 July 2017, purchases of digital currency will no longer be subject to the GST, allowing digital currencies to be treated just like money for GST purposes. Currently, consumers who use digital currencies can effectively bear GST twice: once on the purchase of the digital currency and once again on its use in exchange for other goods and services subject to the GST.
While making the announcement, the government included a scenario to illustrate how the process would work:
[Tristan wants to purchase a computer game worth $100 Australian dollars using digital currency.
Under current law, Tristan must pay GST on purchases of digital currency using Australian dollars. Therefore Tristan would need to pay $10 GST to purchase the equivalent of $100 of digital currency, costing him $110 in total. Tristan would then need to pay another $10 GST when purchasing the computer game.
Consequently, Tristan has paid $20 GST. If Tristan used Australian dollars, not digital currency, Tristan would only have to pay $10 GST not $20 GST.
Under the measure from 1 July 2017, Tristan’s initial purchase of digital currency would no longer be subject to GST, removing the double taxation. Tristan would only pay $10 GST for the purchase of the computer game, providing the same GST outcome as if Tristan used Australian dollars.]