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Australian government introducing legislation to remove double taxation of digital currency

The Australian government has introduced legislation to remove the double taxation of digital currency, in an effort to promote the FinTech industry by making it easier for new innovative digital currency businesses to operate in Australia.

Currently, consumers who use digital currency can effectively bear GST twice: once on the purchase of the digital currency and once again on its use in exchange for other goods and services subject to the GST.

The Bill will ensure that Australians are no longer charged GST on purchases of digital currency, allowing it to be treated the same way as physical money for GST purposes. The law change will retrospectively apply from 1 July 2017, in line with the 2017 Budget announcement.

The government worked closely with the FinTech industry to develop the reform, which was unanimously approved by the States and Territories.

The removal of the double taxation on digital currency was among the steps announced in the 2017-18 budget to promote FinTech innovation and growth.

Another step was legislation to implement Crowd Sourced Equity Funding (CSEF) for public companies. The Bill was passed in the Australian Parliament on 22 March 2017, and will commence 29 September 2017. CSEF is a new fundraising approach that allows entrepreneurs to raise funds—up to $5 million per year—from a large number of individuals in return for equity in their company, with lower disclosure costs than traditional public equity offers. CSEF schemes exist in various countries, including in the UK and New Zealand.

The government has also announced measures to encourage new challenger banks.

The Australian Investments and Securities Commission (ASIC) introduced a FinTech regulatory sandbox in December 2016 to encourage businesses to test innovative financial services without facing the costs of regulatory licensing. The Government plans to legislate an enhanced regulatory sandbox with a 24 month testing timeframe. The 24-month testing timeframe is expected to improves businesses’ ability to evaluate the commercial viability of new concepts.

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