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Coin Loft finds a workaround to an Australian GST law that had previously meant a tax was applied to the total value of bitcoin exchanges in the country.
Coin Loft finds a workaround to an Australian tax law that had previously meant taxes would be applied to the total value flowing through bitcoin exchanges in the country. Users will now save 10% of value on transactions when using Coin Loft's platform.
Digital currency exchange and wallet platform Coin Loft announced yesterday it was no longer to charge the Australian “goods and services” tax upon the total value of BTC transactions on its service. Following a ruling by the Australian tax authorities in 2014, bitcoin has been classified as a separate entity from “money,” and were therefore subject to goods and services tax when an Australian exchange buys or sells the digital currency. This approach is in contrast to foreign currency exchanges in the country, which are not required to charge a tax on the value of the transaction.
Talking about the problems facing Bitcoin, company co-founder David T. commented:
“Coin Loft has faced a number of challenges in the Australian market, including difficulties maintaining banking relationships, uncertainties regarding financial regulation and taxation specifically in regards to GST. […] Changes are slow but it is not impossible, as we have found with our GST solution. We are certain that one day Bitcoin will become mainstream and we hope we are doing our bit to help its progress by providing Australians with an easy way to purchase.”
Although Coin Loft has yet to confirm the exact method of their new tax situation, the UK Guardian newspaper has speculated that it is likely to be making use of a clause in the tax ruling aimed at reducing the tax burden for companies facilitating the trade of bitcoins between two actors, rather than supplying bitcoin from a central stock held by the company.
The 2014 opinion from the Australian Taxation Office stated that if a Bitcoin exchange is managed directly, then a “GST is payable on a supply of bitcoin by you in the course or furtherance of your exchange service enterprise.” The approach that Coin Loft may be using is to avoid holding its own reserve of bitcoins, but instead simply connecting buyers with sellers directly.
The ATO also stated that “if you have acquired bitcoin as an investment, but are not carrying on a business of bitcoin investment, you will not be assessed on any profits resulting from the sale or be allowed any deductions for any losses made.” By no longer supplying the bitcoins directly, the company will only be taxed on the profits they make on BTC transaction fees, which does corroborate Coin Loft's statement that they “will still be charging GST on the Commission component of the order.”
The ruling on Bitcoin taxation in Australian puts both digital currency enthusiasts and businesses in a hard place. The application of GST on the bitcoin supply implies that businesses would also face a tax on the payment “when receiving bitcoin in return for goods and services.”
This double taxation issue has certainly dampened the prospects for bitcoin companies in Australia and despite Coin Loft's new tax approach, the trend of companies fleeing to greener pastures will most likely continue. Just last December, for example, the popular exchange and wallet provider CoinJar relocated its physical headquarters from Melbourne to London.
Bitcoin is also facing a tough time in other nations as well. A 2014 ruling in the USA by the Internal Revenue Service decided that Bitcoins were not “money” and therefore the acquisition of cryptocurrency was subject to Capital Gains Tax and treated as an asset.
Meanwhile in Finland, the Finnish Central Board of Taxes ruled in 2014 that counter to the European Union's taxation policy, bitcoin transactions would not be subject to a 20% VAT, a move that would have been positive had the Bank of Finland not ruled at the same time that the digital currency qualified neither as money or a payment platform.
David T. added:
“[O]ne of the main issues is that regulations and laws are sometimes slow to keep up with emerging technologies. This applies to other technologies also, but because Bitcoin has such a massive potential to change the financial and payments landscape it is difficult to get it right.”
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