The ATO views Bitcoin is neither money nor a foreign currency, and therefore the supply of bitcoin is not a financial supply for goods and services tax (GST) purposes. The ATO, however, views bitcoin as an asset for capital gains tax (CGT) purposes, and transacting with bitcoins is akin to a barter arrangement, with similar tax consequences.
Records required in relation to bitcoin transactions are:
- the date of the transactions
- the amount in Australian dollars (which can be taken from a reputable online exchange)
- what the transaction was for, and
- who the other party was (even if it’s just their Bitcoin address)
If you are not in business or carrying on an enterprise and you pay for goods or services in bitcoin then there will generally be no income tax or GST implications. If you use bitcoin to purchase goods or services for personal use or consumption, any capital gain or loss from disposal of the bitcoin will be disregarded if the cost of the bitcoin is $10,000 or less.
If you receive bitcoin for goods or services you provide as part of your business, then you will need to record the value in Australian dollars as part of your income. This is the same process as receiving non-cash consideration under a barter transaction. The value in Australian dollars will be the fair market value which can be obtained from a reputable bitcoin exchange.