Digital currency and GST

Digital currency and GST

Sales and purchases of digital currency are not subject to GST from 1 July 2017. This means that you do not charge GST on your sales of digital currency and similarly, you are not entitled to GST credits for purchases of digital currency.

You do not have any GST consequences in relation to buying or selling digital currency, or using it as a payment, if you are not carrying on a business.

If you are carrying on a business in relation to digital currency, or as part of your existing business, or if you are accepting digital currency as a payment in your business, you need to consider any GST consequences that may arise.

Digital currency

Digital currency is a digital unit of value that has all of the following characteristics:

  • fully interchangeable with another unit of the same digital currency for the purpose of its use as payment
  • can be provided as payment for any types of purchases
  • generally available to the public free of any substantial restrictions
  • not denominated in any country’s currency
  • the value is not derived from or dependent on anything else
  • does not give an entitlement or privileges to receive something else.

Some examples of digital currencies include Bitcoin, Ethereum, Litecoin, Dash, Monero, ZCash, Ripple, YbCoin.

What is not digital currency?

Things that are not digital currency for GST purposes include:

  • loyalty points provided by retailers that can only be redeemed for products and services specified by that loyalty scheme
  • ‘currency’ used in online multiplayer games, that cannot be used outside the game under which the ‘currency’ is made available
  • ‘digital currency’ with value based on something else or that gives an entitlement or privileges to something else. For example, a token that is aligned with an Australian or foreign currency, or gives you an entitlement to use software application services.

Initial coin offerings (ICOs)

The GST treatment of sales of new currencies or tokens including Initial coin offerings (ICOs) will depend on their particular features. Some ICOs may be designed to be a payment method, while others may offer a share of profits in a product, or provide access to a software application. Depending on the features of the particular token, the GST treatment may be:

  • a security including a share or a managed investment scheme, or a derivative – the sale and purchase of these tokens will be a financial supply
  • if not a security they may be digital currency based on the factors described above – the sale and purchase of these tokens will be a financial supply
  • excluded from the definition of digital currency because the token provides a right or entitlement to goods and services– this may be a taxable supply on which GST is payable.

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