What is a digital currency exchange
A digital currency exchange is an online trading platform that enables entities to trade crypto assets (other than non-fungible tokens) for fiat currency or other crypto assets.
Non-fungible tokens (NFT) are a type of crypto asset that are usually sold on NFT marketplaces and have different GST consequences. For more information, see GST and NFTs.
A digital currency exchange may charge entities a trading fee for facilitating them in trading crypto assets. It may also buy and sell crypto assets with the traders directly.
Digital currency exchanges facilitating crypto asset trades
If you are a digital currency exchange and you are registered for GST, or are required to be registered, you will have GST consequences when facilitating sales between buyers and sellers of crypto assets.
Services to Australian residents
Your supply of facilitating trades of crypto assets will be taxable if you make the supply to an Australian resident located in Australia. You must report and pay GST on your taxable supply.
Services to non-residents
Your supply of facilitating trades of crypto assets will be GST-free if you make the supply to a non-resident who is not located in Australia. You don’t need to pay GST on any GST-free supplies you make.
Example: digital currency exchange operator facilitating trades between Australian and non-resident traders
Crypto P2P Pty Ltd is an Australian digital currency exchange operator that is registered for GST. Crypto P2P allows crypto asset traders to buy and sell directly with each other.
Crypto P2P charges a 1% trading fee to users trading with each other on their platform.
When a user registers for Crypto P2P's services, they provide information to identify their residency and location.
Danielle and Olivia register for Crypto P2P's services to trade CostyCoin (a digital currency) for Australian dollars with each other. Danielle is a non-resident located outside of Australia. Olivia is a resident located in Australia.
Crypto P2P's supply of their services to Danielle is GST-free and they will not have to report and pay GST on this supply. The supply to Olivia is taxable and Crypto P2P must report and pay GST on this supply.
End of exampleDigital currency exchanges trading crypto assets
If a digital currency exchange operator buys and sells crypto assets directly with traders, its supply will be an input-taxed financial supply unless it is a GST-free supply.
For more information on buying and selling, see GST and trading digital currency.
Example: digital currency exchange operator trading crypto assets directly
CoinWallet Pty Ltd is an Australian digital currency exchange operator that is registered for GST. CoinWallet does not provide a trading platform where its users can buy and sell crypto assets with each other. Their users must buy and sell crypto assets directly with CoinWallet.
When a user registers with CoinWallet, they provide information to identify their residency and location.
Stephen and Alice register with CoinWallet to trade CostyCoin (a digital currency) for Australian dollars. Stephen is a non-resident located outside of Australia. Alice is an Australian resident located in Australia.
CoinWallet's supply of CostyCoin to Stephen is GST-free and they will not have to report and pay GST on this supply. CoinWallet's supply to Alice is an input-taxed financial supply and they will not have to report and pay GST on this supply.
End of exampleNon-resident digital currency exchanges and GST registration
You must register for GST if you're a non-resident entity operating a digital currency exchange and you:
- carry on an enterprise, and
- make supplies connected with Australia that exceed the GST turnover threshold.
Claiming GST credits
You can claim GST credits for purchases related to making taxable or GST-free supplies if you operate a digital currency exchange and it is registered for GST.
You generally can't claim GST for purchases related to making an input taxed financial supply, however there are some exceptions.
You can claim GST credits if you make input taxed financial supplies of digital currency and you don't exceed the financial acquisitions threshold.
If you exceed the financial acquisitions threshold, you can claim reduced GST credits for certain reduced credit acquisitions listed in the GST regulations.
For more information on claiming GST credits, see:
- GSTR 2003/9 Goods and services tax: financial acquisitions threshold
- GSTR 2004/1 Goods and services tax: reduced credit acquisitions
- Apportionment