GST and Currency Exchange

Digital currency: GST and digital currency | Australian Taxation Office (ato.gov.au)

Sales and purchases of digital currency are not subject to GST from 1 July 2017 if not carrying on a business.  

When GST applies: 

1. If carrying on a business in relation to digital currency, or as part of existing currency,
   
   
2. accepted digital currency as payment in your business
   
   

When GST does not apply: 

1. only make sales of digital currency, you do not need to register for GST. 
   
   

You must register for GST if your GST turnover is $75,000 or more- not inclusive of input taxed sales. 

Digital currency- claiming GST credits  

Sales of digital currency are input taxed sales therefore, no GST applies & you generally cannot claim GST credits for the GST included in the price you pay for anything you purchased to make those sales. 

However, you may claim GST credits on purchases you use to make digital currency sales if:

• You do not exceed the financial acquisitions threshold and therefore, you will be entitled to full GST credits for purchase relating to digital currency sales 
  
  
• if you exceed the financial acquisitions threshold, you may be able to claim reduced GST credits if you make a specific type of purchase 
  
  

Reduced GST credits: can claim 75% of any GST included in the purchase price. 
The type of purchase must be listed, you cannot claim 75% GST credits on all your costs. Sales and purchases of digital currency are financial supplies.

For digital currency sellers, the costs associated with the following services acquired from another entity will include:

• commission, brokerage costs or arranging services provided by entities that facilitate buying and selling of digital currencies.
  
  
• Costs relating to transaction processing, account maintenance and report generation services. 
  
  

Digital Currency Sales to non-residents will be GST free. 

• You cannot charge GST on the sales to non-residents but are entitled to claim full GST credits for costs incurred in relation to making those sales. 
  
  

No GST consequences arise when using digital currency to pay for goods and services in your business. 

Receiving digital currency as payment: 

GST applies if you receive digital currency as payment and are required to remit 1/11 as GST on the taxable supply payment received. The amount of GST you remit and report on your activity statement must be an amount in Australian currency. 

Bartering and trade exchanges: Bartering and trade exchanges | Australian Taxation Office (ato.gov.au)

Business transactions involving bartering or trade exchanges are subject to same income tax and GST treatment as normal cash or credit transactions. 

Tax treatment

When an entity that is a member of a trade exchange makes a taxable sale to another member, there is a liability for tax, including GST.

Payments to the ATO of GST must be made in Australian currency. 

Goods and Services Tax: 
Foreign Currency Conversion Determination 2018: Goods and Services Tax: Foreign Currency Conversion Determination 2018 (legislation.gov.au)

Disclaimer

This content is intended for general information in summary form on tax and legal matters at the time of first publication and is not intended to provide, and should not be relied upon in place of appropriate professional advice.  Please consult your tax, legal and accounting advisors before acting or relying on any content provided. 

References

https://www.ato.gov.au/Rates/Foreign-exchange-rates/