Businesses that "supply Bitcoin" must "charge GST when they supply bitcoin and may be subject to GST when receiving bitcoin in return for goods and services" according to guidance on treatment of the crypto-currency issued today by the Australian Taxation Office.
"The guidance paper and draft tax rulings issued today provide certainty for the Australian community on the ATO’s treatment of crypto-currencies within the current legislative framework," said ATO senior assistant commissioner Michael Hardy in a statement.
"The ATO has consulted extensively with Bitcoin experts, businesses, industry bodies and other external stakeholders to develop this guidance and explain the obligations of Bitcoin users.
"People involved in buying or selling Bitcoin or other crypto-currencies – whether individuals or businesses – are encouraged to read our guidance. If their circumstances are not covered by the guidance, they can seek a private ruling by contacting us."
The guidance, available from the ATO's website, will also apply to other crypto-currencies as long as they are similar to Bitcoin.
In the ATO's view, Bitcoin is "neither money nor a foreign currency".
"Transacting with bitcoins is akin to a barter arrangement, with similar tax consequences," the guidance states.
Bitcoins will be treated as an asset for capital gains tax purposes.
"Generally, there will be no income tax or GST implications if you are not in business or carrying on an enterprise and you simply pay for goods or services in bitcoin (for example, acquiring personal goods or services on the internet using Bitcoin)," the guidance states.
"Where you use bitcoin to purchase goods or services for personal use or consumption, any capital gain or loss from disposal of the bitcoin will be disregarded (as a personal use asset) provided the cost of the bitcoin is $10,000 or less."
The sale of Bitcoins obtained through mining is taxable income, and mining expenses can potentially be treated as work-related expenses.
"Your bitcoin is trading stock and you are required to bring to account any bitcoin on hand at the end of each income year," the guidance states.
The ATO also said there could be fringe benefit tax consequences for businesses that pay salaries using Bitcoin.
Grey areas of regulation relating to the crypto-currency were a topic of discussion at the recent Cryptocon event in Sydney.
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