On Thursday 18.1.2018, the Commissioner released a draft of the ‘Legislative Instrument’, that the new s9-85(2) of the GST Act contemplates the Commissioner will make, to specify the way in which digital ‘consideration’, for a taxable supply can be converted into Australian currency, and thus create a tax liability (in our currency).

The ‘digital currency’ amendments to the GST Act were made in Treasury Laws Amendment (2017 Measures No. 6) Act 2017 (Amending Act) and it expanded the operation of s9-85, from just foreign currencies, to include, also, ‘digital currencies’ (as defined in s195-1 of the GST Act). See the related TT Tax Month article.

In both cases, the ‘value’ of the taxable supply, is to be expressed in Australian currency, on the basis that it is “treated as if it were an amount of Australian currency worked out in the manner determined by the Commissioner“. As best I can see, there is no other way of converting digital currencies, to Australian currency – so the Commissioner must make this determination, before a tax liability can arise (as it, too, must be expressed in Australian currency). 

The Commissioner released both his draft, of the GST Digital Currency Conversion Determination 2018 (DCC 2018/D1), that he proposes to make, together with a draft explanatory memorandum. The Commissioner invites comments by 15 February 2018.

Clause 4 of the draft determination, provides that the Australian currency equivalent (for the digital ‘consideration’) is:

“Amount of digital currency x your particular exchange rate on the conversion day

Your particular exchange rate‘ can be determined in which ever of the following ways that you chose.

  • the rate from a digital currency exchange;, or
  • a digital currency website; or
  • the agreed rate (being an exchange rate, agreed to between a supplier, and a recipient of a taxable supply).

The ‘conversion day’ is the following:

  • for an ‘accruals’ based taxpayer, the earlier of:  (i) the date on which any of the consideration is received or   (ii) the transaction date / invoice date (which ever you chose).
  • for an ‘cash’ based taxpayer, it is any of:  (i) the transaction date;  (ii) the invoice date; or   (iii) the day on which any of the consideration is received.

The draft determination is expressed to apply from 1 July 2017, which is the date from which the ‘digital currencies’ amendments applied from (despite the fact that the amending Act did not get Royal Assent until 30 October 2018). The legislative instrument, would, therefore, have retrospective application, which, in turn, could have been in breach of s12(2) of the Legislation Act 2003, except, the Commissioner reasons that the legislative instrument doesn’t impose liabilities (but merely quantify them). I’m not sure that I’m convinced about that, as it appears to me that there can be no GST liability, until the Commissioner has determined the means of conversion (per s9-85(2)).

[ATO website: DCC 2018/D1, Explanatory Memorandum; FJM; LTN 12, 18.1.18; Tax Month January 2018]

Study questions (*answers below)

  1. Did the Commissioner issue a draft, of the currency conversion determination, contemplated by s9-85(3) of the GST Act?
  2. Are digital currencies converted to Australian currency, in the same way as foreign currencies?
  3. Is the ‘consideration’, calculated in Australian currency, a product of ‘your exchange rate’ and the ‘conversion date’ (that applies to you)?
  4. Will the digital currency conversion determination take effect from the date on which it is made?


About the author