The global financial community gained a little more
confidence in the way that Bitcoin will be treaed going forward as the Australian
Tax Office (ATO) has provided businesses with some more guidelines on how it
intends to deal with bitcoin in response to an inquiry by a bitcoin
entrepreneur, specifically that income and profits derived from bitcoin
transactions are taxable. This comes as
no surprise that governments would treat Bitcoin in this way as at is seen as a
hybrid between a commodity and a currency.
According to the ATO:
“A Bitcoin is a numerical amount that is allocated to a
‘Bitcoin address’. A Bitcoin address is a long string of numbers and letters,
each one unique. The process through which Bitcoins are created and enter into
circulation is called Bitcoin mining. Mining involves using freely downloadable Bitcoin software
to solve complex cryptographic equations that essentially verify and validate
blocks of Bitcoin transactions. The first ‘miner’ to successfully solving an
equation receives a specified number of newly created Bitcoins as a reward to
their Bitcoin address. Accordingly, Bitcoins rely on a network of Bitcoin miners
using the system to validate transactions and collectively implement a
replicated ledger of Bitcoin transactions. The security of this ledger is
protected by this mining process. Bitcoins are circulated using a peer-to-peer computer
network. Bitcoin users store their Bitcoins in a software program called a
‘Bitcoin wallet’. A transaction involving Bitcoins requires an account, which
is in essence a ‘public-/private-keypair’. A Bitcoin address derived from the
public key is used to identify the account. To transfer Bitcoins to an account
a transaction is created with the address of the account as the destination. To
send Bitcoins from an account, the transaction has to be signed with the
private key associated with the sending account.”
They later say...
“You invested a substantial amount of money in computer
hardware and advanced scientific computing systems with the purpose of making
substantial profit from mining and selling Bitcoins.”
This clarification continues the trend of Australia being
fairly open to responses to Bitcoin treatment.
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