The Government has announced its response to the Senate Economics References Committee Report on Digital Currency.

For the purpose of the Senate Report and the Government response “digital currency” is defined as:

[A] digital representation of value that can be digitally traded and functions as (1) a medium of exchange; and/or (2) a unit of account; and/or (3) a store of value, but does not have legal tender status (i.e., when tendered to a creditor, is a valid and legal offer of payment) in any jurisdiction. It is not issued nor guaranteed by any jurisdiction, and fulfils the above functions only by agreement within the community of users of the virtual currency. Virtual currency is distinguished from fiat currency (a.k.a. ‘real currency’).

The Government’s responses are:

• consumers should not be subject to the GST twice when using digital currency to purchase goods or services. Treasury has released a discussion paper entitled ‘GST treatment of digital currency’.
• in December 2014, the Australian Taxation Office (ATO) released a series of rulings on the income tax, fringe benefits tax and capital gains tax treatments of Bitcoin. Further examination of appropriate tax treatment of digital currencies should be included in the taxation white paper process, with particular regard to income tax and fringe benefits tax.
• the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC), the Reserve Bank of Australia (RBA) and the Treasury have begun preparatory work to review the framework for payments system regulation and to develop clear guidance. One part of this work is ensuring that the RBA and ASIC have the powers to regulate new payment systems – including digital currencies – as they emerge through innovation. More.
• the AML/CTF review report considered whether the existing AML/CTF regime should be extended to include convertible digital currency exchanges and how to make the obligations under the AML/CTF regime technology neutral. It recommended that AUSTRAC should closely monitor the ML/TF risks associated with new payment types and systems (including front-end applications), to ensure gaps do not develop in Australia’s AML/CTF regime.