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19 J. Austl. Tax'n 1 (2017)

handle is hein.journals/jouaustx19 and id is 1 raw text is: DIGITAL CURRENCY: MAY BE A 'BIT PLAYER' NOW, BUT IN THE LONGER TERM A 'GAME CHANGER' FOR TAX STEVEN STERN* ABSTRACT The Prime Minister of Australia, the Hon Malcolm Turnbull MP, has announced that the tax system is one of the key levers the government has to promote economic activity, and that tax is at the centre of the whole productivity agenda. This article draws attention to the major ramifications of technological developments in the monetary field for the capacity of governments to control the economic agenda, including tax. is the definition of 'money' is changing, and it might not be prudent for governments and their advisers to assume that levers to control the composition of tax which existed in the twentieth century will continue to be available in the coming decades of the twenty first century. I. INTRODUCTION Financial technology is bringing innovation into the financial system. It can improve efficiency and service delivery, and it can substantially change the way businesses interact with each other and with consumers. Australian businesses are increasingly using digital currencies for both domestic and international transactions. But this increasing use of digital currencies creates challenges for the taxation system. The definition of 'money' in Australia's taxation legislation does not seem to recognise digital currencies as 'money'. Consequently, transactions involving digital currencies can have taxation consequences which, as the Australian Government has identified, seem incompatible with its commitment to promote technological innovation and economic growth. For example, changes in exchange rates between digital currencies and what traditionally has been recognised as 'money' in taxation legislation can have unintended capital gains tax (CGT) consequences. Sales and purchases involving payment with digital currencies may attract exposure to 'double CGT' if a digital currency is itself regarded as a capital asset. The most egregious example of exposure to * BEc LLB (Mon); LLM PhD (Melb); CTA; Adjunct Professor, College of Law & Justice, Victoria University; Barrister-at- Law, List S Gordon & Jackson, Victorian Bar; Registered Tax Agent. An earlier version of this article was presented as a paper at the Australasian Tax Teachers' Association Annual Conference at the University of New South Wales from 20 to 22 January 2016 being made available electronically at https://www.business.unsw.edu.au/about/schools/taxation-business-law/australasian-tax-teachers- association/2016-atta-conference-papers; at https://www.iicj.net/library/detail.asp?key=935; and, as a published manuscript, in (Winter 2016) Volume 9 Number 34 International In-house Counsel Journal 3821. 1

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