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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.


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