Due to the popularity of digital currency the ATO now recognises Bitcoin and the role it is playing in Australian Business Transactions. 

Firstly, what is Bitcoin?

It is a new payment system. It is currency for the internet. Bitcoin.com explains their service as

“Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet. Bitcoin can also be seen as the most prominent triple entry bookkeeping system in existence.”

So what does this mean for those in Australia?

The Australian Taxation Office (ATO) has confirmed it considers Bitcoin to be property. This means the ATO will treat Bitcoin transactions as barter transactions, with similar tax consequences.

The records you require in relation to Bitcoin transactions are as follows:

-the date of the transaction

-the amount in Australian dollars (calculated from a reputable online exchange institution, i.e. Bitcoin Exchange)

-what the transaction was for

-who the other party was via their Bitcoin Identity

It is important if you receive Bitcoin for goods or services you provide as part of your business that you record the value in Australian dollars as part of your ordinary income.

How do you acquire Bitcoins?

You can acquire Bitcoins as payment for goods or services or purchase bitcoins at a Bitcoin exchange. In addition to this you can also acquire them by exchanging bitcoins with someone near you or by earning them through competitive mining.

While it is a relatively new phenomenon, it is gaining traction and according to bitcoin.org in 2013 “the value of all bitcoins in circulation exceeded US$ 1.5 billion with millions of dollars’ worth of bitcoins exchanged daily.”

At GMD Accounting we have the expertise to assist you in your taxation, business and financial affairs. You can contact our office to speak with an accountant who can offer assistance with your Bitcoin transactions, ensuring you adhere to the ATO tax obligations surrounding barter transactions and the implications on your business.