The Taxing Challenge of Digital Currency

Joel Emery, Miranda Stewart

Research output: Contribution to journalArticlepeer-review


The taxation of digital currency presents at least two key challenges: first, ascertaining its tax characterisation; and secondly, ensuring users' compliance with broader tax and regulatory laws. In 2014, the Australian Tax Office issued rulings concluding that bitcoin should be characterised as a commodity instead of as money or a medium of exchange, for purposes of the Australian Goods and Services Tax (GST) and other tax laws. After significant inquiries and policy debate, the government has moved this year to change the GST law, so as to treat digital currency like money for GST purposes. This article discusses the characterisation challenge and effects, with a particular focus on bitcoin as the most widely used digital currency. It explains how the different taxation of traditional money compared to digital currencies that perform a similar function results in anomalous tax outcomes, which are detrimental to Australian digital currency businesses and are likely to drive these businesses offshore. It considers the issues in light of the legal meaning of money and argues that a functional approach to the definition of money and a purposive approach to the legislation, drawing on international experience, supports the legislative reform proposed by the government. This reform will foster the development of bitcoin intermediaries in Australia, the existence of which is likely to be an essential part of a successful regulatory framework for digital currencies in future.
Original languageEnglish
Pages (from-to)236-269
JournalJournal of Banking and Finance - Law and Practice
Issue number3
Publication statusPublished - 2017


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