Insights | 05 Apr 2024

Digital Currency as Payment for Goods and Services

You’re running a GST registered enterprise and it’s that time again to prepare your business activity statement (BAS). But what happens if your business accepts digital currencies (e.g. cryptocurrency) as payment?

If your business makes a taxable supply (sale) where digital currency is received as payment, you must record and pay the GST amount on your BAS in Australian dollars.

The tax invoice must meet the normal requirements and include either the GST payable in Australian dollars, or sufficient information to work out this amount. This could include the price/value expressed in Australian dollars, or the conversion rate used to work out the GST payable.

Unfortunately, it is not currently possible to pay a GST debt (or any other tax debt for that matter) using digital currency. Therefore, you will either need to convert 1/11th of the digital currency (the GST component) into Australian dollars, or pay the GST amount using funds from other sources.

The buying and selling of digital currencies is classified as an input-taxed financial supply. This means that GST does not apply to these transactions (e.g. using an exchange). Although, you should be aware that income tax and Capital Gains Tax consequences may apply.

What if I’m the one paying using digital currency?

The same rules apply here. If you are registered for GST, you can claim input tax credits on purchases made using digital currency (subject to the usual requirements in the GST law being satisfied).

Any GST credits claimed in your BAS must also be converted into Australian dollars.

How do I convert amounts paid in digital currency?

To work out the Australian dollar amount, you must use the rate on the conversion date that applies. The exchange rate can come from a reputable digital currency exchange/website or can be agreed upon between the supplier and recipient. If the exchange rate is in a foreign currency, this must be converted to Australian dollars.

If you are registered for GST on a non-cash (accruals) basis, the conversion date is the earlier of the day you receive any payment, or the invoice date. If you are registered on a cash basis, you may choose either of these dates (but you may only claim the GST credit in the period the amount is paid).

Contact Pilot

If you need assistance determining the taxation treatment of digital currencies, contact your Pilot advisor on (07) 3023 1300.

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