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Thursday, 19 October 2017
Page: 8049

Senator JACINTA COLLINS (Victoria) (13:06): Labor is in support of the Treasury Laws Amendment (2017 Measures No. 6) Bill 2017. The bill contains two schedules, one to prevent double taxation of cryptocurrencies and the other to provide listing of deductible gift recipient status in tax legislation. Schedule 1 to the bill amends A New Tax System (Goods and Services Tax) Act 1999, the GST act, to ensure that supplies of digital currency receive equivalent goods and services tax treatment to the supplies of money, particularly foreign currency.

This measure was announced in the government's 2017-18 budget under the policy banner, 'GST—removing the double taxation of digital currency'. The government argues that the measure is in keeping with the principles of ensuring double taxation does not occur in the tax system. As the bill's explanatory memorandum details:

Supplies of money receive special treatment under the GST law. Generally, a supply of money is not a supply … This means that entities paying consideration in money are not liable for GST on the supply of the money. Money is treated in this way because it is generally considered purely a medium of exchange that is not consumed and is therefore not subject to GST which seeks to effectively apply tax to final private consumption.

… However, a supply of money is a supply if it is provided as consideration for another supply of money. In cases where one entity is paying another entity for money, the money is not being used exclusively as a medium of exchange to purchase goods, services or property - a valuable service is being provided (for example, activities involving the exchange of money for other money such as debt trading and foreign currency speculation are carried on for profit).

Labor appreciated the Treasury briefing given in relation to this measure. In that briefing Treasury provided guidance on how this measure does not have any wider ramifications for currency in other areas of the law and, importantly, provided assurances that this does not undermine state-issued fiat currencies.

The drafting of the legislation has taken a conservative, or plain vanilla, principles based approach to the drafting. This is designed to prevent new loopholes or hybrid products. They cannot be created to exploit the GST-exempt status of digital currencies. Comparable nations, such as the United Kingdom and the United States, do not apply value-added taxes to digital currencies, and the European Union has ruled that bitcoin is exempt from the VAT. This bill aligns the treatment with those comparable nations.

The measure has support from legal and tax professionals and from the fintech sector. States and territories have been consulted on the reform, and they have agreed to it. The measure's origins can be traced back to both the Senate Economics References Committee and the Productivity Commission in separate inquiries in 2015. Both recommended the measure.

Concerns about the use of digital currencies for criminal activity and money laundering are addressed in anti-money-laundering and counterterrorism financing reforms, according to Treasury. The size of the digital currency market in Australia is unquantifiable, in part because it is inhibited by double taxation.

Schedule 2 of the bill amends the Income Tax Assessment Act 1997 to include the Centre for Entrepreneurial Research and Innovation, or CERI, on the list of deductible gift recipients. This allows members of the public to make a tax-deductible donation to CERI. CERI is located in Nedlands in Western Australia, near the University of Western Australia, and is in the federal electorate of Curtin. It was established in 2015 and initially funded by iron ore miner, Charlie Bass. CERI is registered with the Australian Charities and Not-for-profits Commission. Having deductible gift recipient status ensures that gifts of $2 or more to the organisation will be tax deductible. The amendments apply to gifts made to CERI after 1 January 2017 and before 31 December 2021.

There are two ways an organisation can become a DGR—a deductible gift recipient—either to have DGR endorsement by the tax office or to be listed by name in tax law. Listing organisations in tax law is common and uncontroversial, such as in Labor's Tax and Superannuation Laws Amendment (2013 Measures No. 2) Bill 2013. Labor will continue to support sensible measures brought forward to parliament and we will be supporting this bill.