Nudge Accounting, Tax, GST, accounting, Bitcoin

With Bitcoin use increasing in Australia, there has been little guidance to date from the ATO and other regulatory authorities about the accounting and tax treatment of this payment method. So Nudge Accounting has put together a list of some of the key accounting and tax questions you may have when using Bitcoin.

If I make a sale from my business and the customer pays using Bitcoin, do I need to record the GST on the sale?

We can break this down into two components:

  • When you make a sale to a customer, you should be issuing a valid tax invoice that includes GST if you are registered for GST. You will be required to remit this amount to the ATO the next time you lodge a Business Activity Statement.
  • If you are not registered for GST, you cannot include a GST component on the tax invoice and you are not required to remit any portion of this sale as GST to the ATO.

Outcome: Yes, you are required to record the GST on this sale if you are registered for GST.

If I buy something for my business using Bitcoin, can I claim GST on the purchase?

  • When making a purchase for your business and the supplier provides you with a valid tax invoice that includes their ABN and a GST amount, you are entitled to claim the GST back if you are registered for GST. This is irrespective of the currency you purchase the goods in.
  • If the supplier provides you with a valid tax invoice that includes their ABN and there is no GST on the invoice, you are not entitled to claim any GST, even if you are registered for GST.

Outcome: Yes, you should be able to claim GST on eligible business purchases if you receive a valid tax invoice that includes GST and you are entitled to claim the GST.

Do I need to record sales made with Bitcoin in my income tax return?

The rules of ordinary income apply when you make a sale and payment for that sale is received via Bitcoin. When you generate a tax invoice upon sale, you will be deemed to have made a sale at that point if your accounting system is on an accruals basis. The key point is that the recognition of the income is separate to how it is paid. So if you are being paid by Bitcoin, or via cash, you will still need to record any sale as ordinary income.

If you are recording income on a cash basis, you will need to record your Bitcoin payment as a sale in your income tax return. This is the case even though Bitcoin is an anonymous payment method.

Outcome: Yes, you will need to include all ordinary income from sales made using Bitcoin in your income tax return.

Can I claim a tax deduction for business purchase made using Bitcoin?

The rules of general and specific deductions apply when you make a purchase for your business and that purchase is made via Bitcoin. When you receive an invoice when making a purchase, you will be deemed to have incurred a business expense at this point if your accounting system is on an accruals basis. This is irrespective of whether you are paying via Bitcoin or other means.

If you are recording deductions on a cash basis, you will need to both record and support your Bitcoin payment as a means of identifying that the business deduction was actually incurred.

Outcome: Yes, you can claim eligible business purchases made using Bitcoin as a tax deduction. Given the difficulties of the ATO in tracking Bitcoin payments, make sure you keep records supporting your payment for this business expense.

This article is general in nature and is not intended to replace in any way professional accounting and legal advice.