Edited version of your private ruling

Authorisation Number: 1012588747657

Ruling

Subject: Entitlement to a refund under the Tourist Refund Scheme

Question 1

Are you entitled to a refund of goods and services tax (GST) under the Tourist Refund Scheme (TRS) in relation to the exportation of Bitcoins?

Answer

No, you are not entitled to a refund of GST under the TRS in relation to the exportation of Bitcoins.

Entitlement to a refund under the TRS exists where an entity takes 'goods' overseas as accompanied baggage. Bitcoin is not considered to be 'goods' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Relevant facts and circumstances

You made a claim for a refund of GST under the TRS for an amount in relation to the exportation of Bitcoins.

In support of your claim you presented a copy of your passport, airline ticket to a foreign country, extracts of a number of private rulings issued to you by the ATO, and a tax invoice issued to you for the acquisition of Bitcoins.

The tax invoice is dated just prior to your departure from Australia.

The tax invoice specifies the quantity of Bitcoins purchased, the unit price and the total price of the supply including GST.

The GST amount is included in the price you paid and the invoice refers to GST being added to the price 'as per ATO Private Ruling xxxx'.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

A New Tax System (Goods and Services Tax) Act 1999 Subsection 9-10(1)

A New Tax System (Goods and Services Tax) Act 1999 Division 168

A New Tax System (Goods and Services Tax) Act 1999 Section 168-5

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1

A New Tax System (Goods and Services Tax) Regulations 1999 Division 168

Reasons for decision

Question 1

Summary

You are not entitled to a refund of GST under the TRS. Bitcoins are not 'goods' taken overseas as accompanied baggage.

Detailed reasoning

Bitcoin

Bitcoin is a digital currency which is not under the control of any central authority and is circulated worldwide using a peer-to-peer computer network. Bitcoin relies on the principle of cryptography to validate transactions and to generate Bitcoins.

A Bitcoin is a numerical amount that is allocated to a Bitcoin address. A Bitcoin address is a long string of numbers and letters and each Bitcoin address is unique. Bitcoin users store their Bitcoin holdings in a Bitcoin wallet, which is a software program that saves Bitcoin addresses.

Bitcoin is created and entered into circulation through a process called Bitcoin mining. Mining involves using software to solve complex equations. On successfully solving an equation, a specified number of newly created Bitcoin is awarded to the miner. Alternatively, Bitcoin already in circulation can be acquired by purchasing it, or accepting it as a gift or in exchange for goods and services.

A transaction involving Bitcoin requires an account, which is in essence a 'public/private keypair'. A Bitcoin address derived from the public key is used to identify the account. To transfer Bitcoins to an account, a transaction is created with the address of the account as the destination. To send Bitcoins from an account, the transaction has to be signed with the private key associated with the sending account.

Tourist Refund Scheme

Division 168 of the GST Act was introduced to provide for the refund of GST that was paid on the supply of goods to entities who take those goods outside Australia. Generally, the goods must be exported as accompanied baggage in the circumstances specified in the Regulations. (Initially the arrangement applied for travellers going overseas and exporting the goods as accompanied baggage, but it was subsequently extended to residents of external territories exporting the goods other than as accompanied baggage by the Tax Laws Amendment (GST Administration Measures) Act 2009).

The Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 explains the policy intent of the TRS as follows:

TOURIST REFUNDS

6.382 Tourists may buy goods in Australia that they will take home with them when they leave for use outside Australia. This is like exporting the goods. If you leave Australia with accompanied goods you may be entitled to a refund of all or some of the GST included in the price of the goods section 168-5. The regulations can specify for what acquisitions a refund can be made and how the refund will be paid.

The TRS is administered for the Commissioner of Taxation by the Australian Customs and Border Protection Service. Refer Division 168 of the A New Tax System (Goods and Services Tax) Regulations 1999.

Relevantly, section 168-5 provides the following (emphasis added):

168-5 Tourist refund scheme

Exporting goods as accompanied baggage

(1) If:

(a) you make an acquisition of goods the supply of which to you is a *taxable supply; and

(b) the acquisition is of a kind specified in the regulations; and

(c) you leave Australia, and export the goods from Australia as accompanied baggage, in the circumstances specified in the regulations;

The Commissioner must, on behalf of the Commonwealth, pay to you and amount equal to:

(d) the amount of GST payable on the taxable supply; or

(e) such proportion of that amount of GST as is specified in the regulations.

Paragraph 168-5(1)(a) of the GST Act provides that for a refund to be payable under the TRS, there must be an acquisition of 'goods' and the supply of those goods to you must have been a taxable supply.

A transfer of Bitcoin is a taxable supply under section 9-5 of the GST Act because 'supply', as defined in subsection 9-10(1) of the GST Act, means any form of supply whatsoever. On this basis, the supply of the Bitcoins is a supply for the purposes of the GST Act.

You have provided an invoice that shows that the supply to you was treated as a taxable supply (because it was for consideration, made by the supplier in the course of their enterprise, it was connected with Australia and the supplier was registered).

However, even though the supply to you was a taxable supply, a refund of GST under the TRS is only payable in respect of 'goods'.

Meaning of 'goods'

Section 195-1 of the GST Act defines 'goods' to be 'any form of tangible personal property'.

Property

'Property' refers to specific form of legal relationship that an individual has over an object or resource, whether that object or resource is tangible or intangible in nature. A holder of a property relationship will have an enforceable right to exclude against the rest of the world.

A holder of Bitcoin (the number and related private key) does not have an enforceable right to exclude the world at large from that Bitcoin. The holder merely has the freedom to keep that Bitcoin private from the rest of the world, but no legally enforceable right to do so. Instead, Bitcoin (the number and related private key) is characterised as confidential information to the extent that the holder of Bitcoin can prevent anyone from knowing the related private key.

Accordingly, and as previously advised in your private ruling, Bitcoin is not property and is incapable of being privately owned.

Because Bitcoin is not property, it therefore cannot be 'goods' under section 195-1 of the GST Act. They therefore cannot be goods that are exported as accompanied baggage.

Tangible personal property

Furthermore, as well as not being 'property', the Bitcoins and the rights to Bitcoin wallets are also not 'tangible personal property'.

The term 'tangible personal property' is not defined in the GST Act and therefore the words take on their ordinary meaning.

Macquarie Dictionary (6^th Edition, online version www.macquariedictionary.com.au)

relevantly defines 'tangible' as:

1.  capable of being touched; discernible by the touch; material or substantial.

…

4.  (of an asset) capable of being possessed or realised; having the form of real property or chattels.

…

This indicates that 'tangible' refers to the property needing to have a physical form. The requirement that the goods be exported as 'accompanied baggage' further emphasises that what is exported must be real material property.

Similarly, Black's Law Dictionary defines 'tangible personal property' as "property such as a chair or watch which may be touched or felt in contrast to a contract.'' It is the touchable and movable assets of a person, and includes such things as jewellery, vehicles, furniture and art. (www.thelawdictionary.org, incorporates Black's Law Dictionary 2nd Ed).

In contrast, 'intangible' is defined as

1. incapable of being perceived by the sense of touch, as incorporeal or immaterial things

...

3.  (of an asset) existing only in connection with something else, as the goodwill of a business.

…

The distinction between tangible and intangible has been considered in our public ruling GSTR 2003/15 Goods and services tax: importation of goods into Australia (See paragraph 7 and associated footnote reference) with the following example:

'Goods' is defined in subsection 195-1(1) to mean 'any form of tangible personal property'. Therefore, 'goods' does not include intangible things, such as computer software downloaded over the Internet.

Similarly, GSTR 2000/31 Goods and services tax: supplies connected with Australia considers the meaning of a 'supply of goods' and states:

'Personal property embraces all forms of property other than land or an interest in land. 'Tangible' connotes a physical existence and has the effect of excluding intangibles. Thus, a good is any form of personal property that has a physical existence but does not include intangible personal property such as intellectual property like a copyright.'

From the definitions and explanations above it can be seen that the Bitcoins are intangible rather than tangible and therefore cannot be 'goods'.

We note that your tax invoice for the acquisition refers to the rights to the Bitcoin wallet as being 'stored and maintained as [a] physical "Paper wallet"'. The 'paper wallet' records the private key. The recording of the private key merely evidences the alpha numeric combination required to access the Bitcoins through the peer-to-peer network. As stated above, the supply to you is of Bitcoins and the transfer of the paper wallet merely facilitates the supply and is evidence of the arrangement between the parties, and is not tangible personal property.

Therefore, as neither the paper wallet nor the Bitcoins are 'tangible personal property' they are not 'goods' within the meaning of section 195-1 of the GST Act'.

Conclusion

As the Bitcoin wallet and Bitcoins are not 'goods' you have not exported 'goods' from Australia as accompanied baggage. Therefore you are not entitled to a refund under the Tourist Refund Scheme for the GST you paid on your acquisition of the Bitcoin wallet and Bitcoins.