Australian exchange Coin Loft has received an official ruling exempting it from having to charge Goods and Services Tax (GST) on local bitcoin sales, according to the company.
The exchange claims the private ruling from the Australian Taxation Office (ATO) means that it need not apply the GST to its bitcoin exchange price. As a result, the firm ceased charging the tax on 26th January and says it is the first Australia-based exchange to do so.
The tax must still be charged on the commission component of the order, however, and a Coin Loft blog post also stated that commission fees would increase from 3 to 5% as a result of the process, though the overall price would remain competitive with its GST-charging competitors.
‘Severely affected’ by tax
Coin Loft‘s David Temple told CoinDesk that the company submitted its private ruling application in October and that it was the only Australian exchange charging GST at the time.
Temple said:
“Our business was severely affected by this, so we decided we had nothing to lose by making the application.”
Other exchanges began adding GST in the weeks following, but after consulting with its legal team Coin Loft decided that pursuing the ruling could produce a favorable result for its customers.
The application process came with “significant costs”, though, Temple added, so the company decided a commission fee increase of 2% was reasonable as a means to recoup some of that expense.
“Effectively for the customer we swapped a 10% GST for a 2% commission increase,” he said.
Competitive advantage
Coin Loft is not disclosing any specific details of its ruling, knowing that the advantage it gains by being first to have such a ruling will be temporary if competitors follow the same path.
ATO private rulings are valid only for the specific case in question and are not binding in other situations, even if circumstances are similar. The office has issued other private rulings pertaining to bitcoin in the past.
The ATO’s position on bitcoin has been controversial since it released a ruling on how tax laws apply to bitcoin businesses in August last year. The ruling stated that 10% GST must be applied to all sales of bitcoins themselves, rendering local exchanges unable to compete with overseas exchanges on price.
Melbourne-based Coin Loft, founded by two software developers, has operated as a fixed-price exchange serving the Australian market since January 2014.
It announced it would suspend bitcoin trading after the ATO’s ruling was released, although this did not come about.
Another local exchange, CoinJar, decided to move offshore to the UK, while bill paying service Living Room of Satoshi said it would use some international exchanges to avoid passing extra charges to its users.
Melbourne city image via Shutterstock