Edited version of private advice

Authorisation Number: 1051899952747

Date of advice: 16 September 2021

Ruling

Subject: GST and cryptocurrency mining

Question 1

Are You making a taxable supply for the purposes of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for the services provided to an overseas cryptocurrency mining pool?

Answer

No, You are not making a taxable supply under section 9-5 of the GST Act. This is because the supply of the computing power by you is a GST-free supply under Item 2 in the table to subsection 38-190(1) of the GST Act.

Question 2

Are You entitled to an input tax credit (GST credit) for the creditable acquisitions you purchase in relation to the supply You provide to the cryptocurrency mining pool as per section 11-20 of the GST Act?

Answer

Yes, You are entitled to claim GST credits (in your activity statement) for the GST included in your creditable acquisitions provided you hold a valid tax invoice and the supply to you was a taxable supply.

This ruling applies for the following period:

1 July 20XX to 30 June 20XX

Relevant facts and circumstances

You are registered for GST.

You provide cryptocurrency mining services to a mining pool (MP) who is not a resident of Australian and is located outside of Australia. You hire cloud services from a cloud vendor, who is an Australian GST registered entity, which provides the computing power required for the cryptocurrency mining services You provide to the MP.

The payment You receive from the MP for your services is paid in cryptocurrency.

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 section 11-5

A New Tax System (Goods and Services Tax) Act 1999 section 11-20

A New Tax System (Goods and Services Tax) Act 1999 section 38-190

Reasons for decision

Question 1

You are liable for GST on any taxable supplies that you make in carrying on your cryptocurrency mining enterprise. You make a taxable supply under section 9-5 of the GST Act if you:

a)    make a supply for consideration

b)    the supply is made in the course or furtherance of an enterprise that You carry on

c)    the supply is connected with the indirect tax zone, and

d)    are registered or are required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

From the facts provided, you are making a supply of mining services for consideration, in the course of an enterprise that you carry on, in the indirect tax zone and you are registered for GST. Therefore, you would be making taxable supplies. However, supplies will not be taxable supplies to the extent that they are GST-free or input taxed.

There is no provision in the GST Act that would make your supplies input taxed. However, under subsection 38-190(1) certain supplies made to non-residents are GST-free supplies.

Subsection 38-190(1) of the GST Act sets out in a table those things, other than goods or real property, for consumption outside the indirect tax zone that are GST-free. Item 2 in the table in subsection 38-190(1) of the GST Act provides that a supply that is made to a non-resident who is not in the indirect tax zone when the thing supplied is done and

a)    the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done, nor a supply directly connected with real property situated in the indirect tax zone or

b)    the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered for GST.

You have advised that the MP entity is a not a resident of Australia and not situated in the indirect tax zone (Australia).

Therefore, no GST is payable on your supply of computing services to the MP. This is because the supply of the computing power by You is made to a non-resident who is not in Australia when the thing (service) is done and thus, satisfies the requirement in subsection 38-190(1) (Item 2) of the GST Act and is a GST-free supply.

Question 2

Under section 11-20 of the GST Act You are entitled to the GST credit for any creditable acquisition that you make.

You make a creditable acquisition under section 11-5 of the GST Act if:

a)    You acquire anything solely or partly for a creditable purpose; and

b)    the supply of the thing to You is a taxable supply; and

c)    You provide, or are liable to provide, consideration for the supply; and

d)    You are registered or required to be registered for GST.

You acquire a thing for a creditable purpose to the extent that You acquire it in carrying on your enterprise and the acquisition does not relate to making supplies that would be input taxed or of a private or domestic nature.

The acquisition of hardware, software and electricity from Australian GST registered entities does not relate to making supplies that would be input taxed (as determined in Question 1) or of a private or domestic nature. The acquisitions are made for a creditable purpose as they acquired in carrying on your enterprise. You are currently registered for GST.

As a result, You will be making creditable acquisitions if the supply of the hardware, software and electricity costs to You is a taxable supply. Where these supplies to You is a taxable supply, all of the requirements for a creditable acquisition under section 11-20 of the GST Act will be satisfied giving rise to an entitlement to a GST credit.

You will be able to claim GST credits for the GST included in your creditable acquisitions related to your GST-free supply to the MP (in your activity statement) provided you hold a valid tax invoice.

Additional information

The sale of the digital currency (Ethereum) You receive is a separate supply to your supply of mining services to the MP. Digital currency sales are input taxed sales (financial supplies) which means You don't pay GST on these sales You make and generally, You can't claim GST included in the price You pay for anything You purchase to make these sales.