Edited version of your written advice

Authorisation Number: 1012758690934

Ruling

Subject: GST and sale of bitcoin

1. Do you make a supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you sell bitcoin as agent for the Customer in the bitcoin transaction you have with the customer?

2. Do you make make any other taxable supply in the bitcoin transaction?

Advice

1. Yes. Based on the information received, you are selling the bitcoin in your own right and not on behalf of the customer in the bitcoin transaction you have with the customer. Accordingly, you are making a supply of bitcoin under section 9-10 of the GST Act.

2. Yes. Based on the information received, you make a supply of bitcoin bill payment services to the customer in the bitcoin transaction and the supply is a taxable supply where all the requirements in section 9-5 of the GST Act are met.

Relevant fact

You are an Australian company and registered for the goods and services tax (GST). You operate a website which allows any person to pay a BPay bill using bitcoin.

You provided the following information about the bitcoin transaction:

• You only accept orders up to $XXX Australian dollars.

• In order to fulfil the customer's order, you place a sell order for the relevant amount of bitcoin on a Bitcoin Exchange, through your account on that Bitcoin Exchange.

• You never hold the customer's bitcoin in your own right. Rather, you immediately sell the customer's bitcoin (or an amount of bitcoin equal to that amount) through a Bitcoin Exchange.

• Bitcoin Exchanges operate in one or two ways:

a) As brokers/dealers rather than a 'true' exchange - where the transaction occurs between the user (in this case you) and the Bitcoin Exchange directly; or

b) As a true exchange - where the transaction occurs between the user and another user, and the Bitcoin Exchange merely operates a marketplace to match buyers and sellers - in which case neither buyer nor seller is aware of the identity of the person they transact with (similar to a stock exchange).

• You use a number of Bitcoin Exchanges both inside and outside Australia. The customer is not entitled to direct you as to where and how you sell the bitcoin. The identity of the Bitcoin Exchange is not provided to the customer. As set out in paragraph (b) above, in some cases, you yourself do not know the identity of the purchaser of the bitcoin.

• You bear both the downside risk and upside reward of fluctuations in the exchange rate of bitcoin to Australian dollars in the time between which the order is placed by the Customer and the time that you receive the proceeds of sale of the bitcoin on the Bitcoin Exchange. This is disclosed and agreed with the customer in the terms and conditions. However, such fluctuations are usually very small because of the limited time period between the transfer of bitcoin from the customer and the sale of the bitcoin by you.

• The bitcoin transaction is governed by your term and conditions, which form a contract between you and the customer. The customer is required to accept the term and conditions when placing an order. You have provided us with a copy of the term and conditions.

• The following key matters (from the terms and conditions) are part of the contractual relationship between you and the customer in the bitcoin transaction:

a) the customer directs and authorises you to sell the relevant amount of bitcoin on their behalf and to apply the proceeds of sale to pay their BPay bill.

b) If there is a difference between the quoted rate and the actual rate obtained by you for the sale of the bitcoin, you bear the cost or profits from the difference. That is, you are always required to pay the amount of the BPay customer's bill, even if that amount is more or less than the proceeds of sale of the customer's bitcoin.

c) The customer appoints you as your agent for the sole purpose of selling the bitcoin and paying the BPay bill.

d) Your authority is limited to selling the bitcoin and paying the BPay bill on behalf of the customer.

e) You have full discretion to choose where and to whom you sell the bitcoin.

f) You do not act as agent for any Bitcoin Exchange.

g) You must provide a tax invoice to the customer which specifies the amount of bitcoin sold, the amount of the fee, GST charged on the fee, and the total amount in Australian Dollars of the BPay bill.

h) You make no representation or warranty to the customer as to whether or not the bitcoin sold by you on behalf of the customer is a taxable supply made by the customer. It is the customer's responsibility, if they are carrying on an enterprise, to determine whether or not they are making a taxable supply when they engage you to sell the bitcoin on their behalf.

i) Your fee is charged based on the Australian Dollar amount of the BPay bill.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-10

Reasons for decisions

Question 1

The Australian Taxation Office (ATO) has published Goods and Services Tax Ruling GSTR 2014/3 to explain the Commissioner's view on the GST consequences of transactions involving the use of bitcoin.

According to GSTR 2014/3 a transfer of bitcoin from one entity to another is a supply for GST purposes and bitcoin is not money for the purposes of the GST Act. Further a supply of bitcoin is not a financial supply nor is it another type of input taxed supply.

A supply of bitcoin is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if the other requirements in that section are met, and the supply is not GST-free under Division 38 of the GST Act (for example, as a supply to a non-resident for use outside of Australia). A supply of bitcoin in exchange for goods or services will be treated as a barter transaction.

You have an agreement with a customer where you agree to provide the customer with bitcoin bill payment services to enable the customer to quickly and easily pay their bills with bitcoin. In return you will receive a fee for this service.

Under the terms and conditions of the agreement, the bitcoin transaction is carried out as followed:

• the customer creates an account with you and provides detail of the bill to be paid, biller's name and amount (order);

• you convert the dollar amount required to pay in the bill and your fee into bitcoin and request the customer to transfer the total amount of bitcoin to you;

• on receipt of the bitcoin from the customer you sell them immediately for Australian dollars and then use those Australian dollars to pay the customer's order. You will always fulfil the BPay payment as set out in the customer's order. If the proceeds of sale of the bitcoin are less than the BPay Payment, you will make up the difference and if the proceeds of sale of the bitcoin are more than the BPay payment you retain the difference.

The agreement provides that you are appointed as the customer's agent for the sole purpose of selling the bitcoin on behalf of the customer and remitting the proceeds of sale less your fee (being the amount of the bill) to the Biller via BPay. However, the word 'agent' in the agreement does not confirm that you are acting as an agent when selling the bitcoin since there are several transactions that are carried out in the agreement with the customer. We will therefore consider the agency factors listed in GSTR 2000/37 to consider whether you are acting as an agent for the customer when selling the bitcoin to Bitcoin Exchange.

According to paragraph 28 of GSTR 2000/37 the following factors may show that you are an agent under an agency relationship:

• Any description of you as an agent, having authority to act for another party, in an agreement (expressed or implied) between you and the other party;

• Any exercise of the authority that you are given to enter into legal relations with a third party;

• Whether you bear any significant or commercial risk;

• Whether you act in your own name;

• Whether you are remunerated for your services by way of commissions and whether you are entitled to keep any part of your remuneration secret from another party; and

• Whether you decide the price of things that you might sell to third parties.

Based on the information received, we do not consider that you are acting as an agent for the customer when selling the bitcoin received from the customer to Bitcoin Exchange for the following reasons:

• you advised that you sell the bitcoin using your account and do not disclose that you are selling the bitcoin on behalf of the customer to Bitcoin Exchange. You also advised that the customer is not entitled to direct you as to where and how you sell the bitcoin. The identity of the Bitcoin Exchange is not provided to the customer. This action indicates that you are acting in your own name when selling the bitcoin and not on behalf of the customer.

• In the agreement you agree to always fulfil the BPay payment as set out in the customer order and when you pay the amount in the order to the Biller via BPay, it is considered that you have satisfied your obligation to the customer. Further you agree to make the difference if the proceeds of the sale are less than the BPay Payment and where the proceeds of the sale are more than the BPay payment you will retain the difference. In this instance you are bearing the commercial risk under the agreement with the customer. It does not matter whether the commercial risk is small as this action indicates you are acting in your own right when selling the bitcoin.

To summarise we consider you are operating as a bitcoin trader not acting as an agent for the customer when selling the bitcoin under the bitcoin transaction.

Accordingly, you have made a supply of bitcoin to Bitcoin Exchange and the supply is a taxable supply under section 9-5 of the GST Act where all the requirements in that section are met.

Question 2

Based on the information received, we consider that the following supplies are carried on in the bitcoin transaction:

• You make a supply of bitcoin bill payment services to the customer and the consideration for the supply is the fee.

• The customer is making a supply of bitcoin to you and the consideration for the supply is the amount to be paid in the customer's bill.

• You make a supply of bitcoin to the Bitcoin Exchange and the consideration is the amount received from Bitcoin Exchange.

Your supply of bitcoin bill payment services to the customer is a taxable supply where all the requirements in section 9-5 of the GST Act are satisfied.

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