Private ruling: Crypto mining and digital currency
Date of advice: 23 August 2022
Published: November 2022
Ruling period: XX XXXX 20XX to XX XXXX 20XX

Ruling: Q1: Are carrying on a business for mining digital assets? | A1: Yes. | Q2: Do you have to pay GST on services that you provide to an overseas cryptocurrency mining pool? | A2: No, you are not liable to pay GST as you are not making a taxable supply of mining service under section 9-5 of the A New Tax System (Goods and Service Tax) Act 1999 (GST Act). This is because your supply is GST-free under item 2 in the table in subsection 38-190(1) of the GST Act. | Q3: Do you have to pay GST on sales of a cryptocurrency that you earned from providing services to an overseas cryptocurrency mining pool? | A3: No, you are not liable to pay GST as your supply of digital currency, in exchange for Australian currency, is input taxed under item 9 in the table in subsection 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 2019 (GST Regulations). | Q4: Are you entitled to a GST credit for expenses that you have incurred in relation to the services that you supply to the overseas cryptocurrency mining pool? | A4: Yes, you are able to claim GST credits for the GST included in your creditable acquisitions (in your activity statement) in relation to providing services to an overseas cryptocurrency mining pool provided you hold a valid tax invoice.

Relevant facts and circumstances: You are registered for GST.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 7-1 | A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 9-10 | A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 9-20 | A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 9-25 | A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 9-27 | A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 9-40 | A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 11-5 | A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 11-15 | A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 11-20 | A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 29-10 | A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 29-70 | A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 38-190 | A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 40-5 | A New Tax System (Goods and Services Tax) Act 1999 (Cth) section 195-1 (definition of 'Australian resident', 'carrying on', 'digital currency', 'enterprise', 'indirect tax zone', 'money', 'non-resident') | A New Tax System (Goods and Services Tax) Regulations 2019 (Cth) section 40-5.06 | A New Tax System (Goods and Services Tax) Regulations 2019 (Cth) section 40-5.08 | A New Tax System (Goods and Services Tax) Regulations 2019 (Cth) section 40-5.09 | Income Tax Assessment Act 1997 (Cth) section 995-1

Reasons for decision: Summary: Yes, you are carrying on a business of mining digital assets. | Detailed Reasoning - Carrying on a business: Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines 'business' as 'including any profession, trade, employment, vocation or calling, but not occupation as an employee'. The case of Evans v. Federal Commissioner of Taxation 89 ACT 4540; (1989) 20 ATR 922 stated that whether an activity amounts to carrying on business for taxation purposes is a question of fact. There is no exhaustive or determinative definition which can be applied to determine this matter. Martin v. Federal Commissioner of Taxation (1953) 90 CLR 470; (1953) 10 ATD 226; (1953) 5 AITR 548 , however, provides that the test for determining whether a business is being carried on is both subjective, which considers the individuals purpose at the relevant time, and objective, which considers the nature and extent of the activities undertaken. Taxation Ruling TR 97/11 Income Tax: Am I carrying on a business of primary production? (TR 97/11) and Taxation Ruling TR 2005/1 Income Tax: carrying on a business as a professional artist provides the Commissioner's view of the factors that are considered important in determining if you are in business for tax purposes. The factors are: • whether the activity has a significant commercial purpose or character; • whether the taxpayer has more than just an intention to engage in business; • whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity; • whether there is regularity and repetition of the activity; • whether the activity is of the same kind and carried on in a similar manner to that of ordinary trade in that line of business; • whether the activity is planned, organised and carried on in a businesslike manner such that it is described as making a profit the • size, scale and permanency of the activity; and • whether the activity is better described as a hobby, a form of recreation or sporting activity. No one indicator is decisive. The indicators must be considered in combination and as a whole. Whether a 'business' is carried on depends on the overall impression. Your activity demonstrates a number of the relevant business indicators as set out in TR 97/11. The overall impression of the activity is that a business of mining digital assets is being carried on. | Detailed Reasoning - Question 2: Do you have to pay GST on services that you provide to an overseas cryptocurrency mining pool? | Summary: No. You are not liable to pay GST as you are not making a taxable supply of mining service under section 9-5 of the A New Tax System (Goods and Service Tax) Act 1999 (GST Act). This is because your supply is GST-free under item 2 in the table in subsection 38-190(1) of the GST Act (item 2). | Detailed Reasoning - Taxable supply: You are liable for GST on any taxable supplies that you make. [1] You make a taxable supply under section 9-5 of the GST Act if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with the indirect tax zone; and (d) you are *registered, or *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. | Detailed Reasoning - Supply for consideration: A supply is any form of supply whatsoever. [2] You supply of your computer processing power to a mining pool operator is made for consideration. Therefore, you meet the requirement under paragraph 9-5(a) of the GST Act as your supply of mining services is made for consideration. | Detailed Reasoning - Enterprise: 'Enterprise' is defined under paragraph 9-20(1)(a) of the GST Act to include, among other things, an activity or a series of activities done in the form of a business. The phase 'carrying on' in the context of an enterprise incudes doing anything in the course of the commencement or termination of the enterprise. [3] Miscellaneous Taxation Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on and enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) considers the meaning of 'enterprise' for the purposes of determining an entity's entitlement to an Australian Business Number. Goods and Services Tax Determination GSTD 2006/6 Goods and Services Tax: MT 2006/1 have equal application to the meaning of 'entity' and 'enterprise' for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (GSTD 2006/6) confirms that the principles in MT 2006/1 apply equally to the term enterprise for GST purposes. [4] Paragraph 178 of MT 2006/1 references TR 97/11 in discussion of the main indicators of carrying on a business. Consequentially, we consider that your activities related to providing mining services to an overseas mining pool, aligned with the reasoning provided in Question 1, to be in the form of a business and thus amount to an enterprise you carry on. Therefore, you meet the requirements under paragraph 9-5(b). | Detailed Reasoning - Connected with the indirect tax zone: Indirect tax zone means Australia but does not include external territories and certain offshore areas. [5] Subsection 9-25(5) of the GST Act sets out when a supply of anything other than goods or real property is connected with Australia: Supplies of anything else (5) A supply of anything other than goods or * real property is connected with the indirect tax zone if: (a) the thing is done in the indirect tax zone; or (b) the supplier makes the supply through an * enterprise that the supplier * carries on in the indirect tax zone; or ... Your supply of mining is connected with Australia because it is made through an enterprise that your director carries on through a fixed place in Australia. [6] | Detailed Reasoning - Registered or required to be registered for GST: You meet the requirements under paragraph 9-5(d) of the GST Act as you are registered for GST. GST-free and input taxed supplies A supply is not a taxable supply to the extent that it is GST-free or input taxed. There are no provisions in the GST Act that would make your supply of mining services an input taxed supply. Therefore, what remains to be considered is whether your supply of mining services is GST-free. | Detailed Reasoning - GST-free supplies: Subsection 38-190(1) of the GST Act comprises five items which set out certain supplies of things other than goods or real property that are GST-free when they are consumed outside Australia. If the requirements of one of those items are met, the supply is GST-free, provided subsections 38-190(2), (2A) or (3) do not negate that GST-free status. Item 2 provides that a supply of anything, other than goods or real property, made to a non-resident who is not in Australia when the thing supplied is done is GST-free if: (a) the supply is neither a supply of work physically performed on goods situated in Australia when the work is done, nor a supply directly connected with real property situated in Australia; 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. A non-resident means an entity that is not an Australian resident for the purposes of the Income Tax Administration Act 1936 . [7] Your supply of mining services is provided to a non-resident who is located outside of Australia and is neither a supply of work physically performed on goods situated in Australia when the work is done, nor a supply directly connected with real property situated in Australia. Therefore, your supply of mining services is GST-free under item 2 paragraph (a) as your supply is made to a non-resident who is not in Australia when the thing supplied is done. Subsections 38-190(2), (2A) or (3) do not apply to negate your GST-free status. You are not liable to pay GST on your supply of your mining services. | Detailed Reasoning - Question 3: Do you have to pay GST on sales of a cryptocurrency that you earned from providing services to an overseas cryptocurrency mining pool? | Summary: No, you are not liable to pay GST as your supply of digital currency, in exchange for Australian currency, is input taxed under item 9 in the table under subsection 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 2019 (GST Regulations). | Detailed Reasoning - Detailed Reasoning: As discussed in our reasoning under question 2, you are liable for GST on any taxable supplies you make. [8] You make a sale of Ether in exchange for Australian currency. Subsection 9-10(4) of the GST Act provides that a supply does not include a supply of digital currency unless the digital currency is provided as consideration for a supply that is a supply of money or digital currency. 'Digital currency' is defined under section 195-1 of the GST Act: "digital currency" means digital units of value that: (a) are designed to be fungible; and (b) can be provided as • consideration for a supply; and (c) are generally available to members of the public without any substantial restrictions on their use as consideration; and (d) are not denominated in any country's currency; and (e) do not have a value that depends on, or is derived from, the value of anything else; and (f) do not give an entitlement to receive, or to direct the supply of, a particular thing or things, unless the entitlement is incidental to: (i) holding the digital units of value; or (ii) using the digital units of value as consideration; but does not include: (g) * money; or (h) a thing that, if supplied, would be a * financial supply for a reason other than being a supply of one or more digital units of value to which paragraphs (a) to (f) apply. We consider that Ether is a digital currency under the definition of the GST Act. Money is defined under section 195-1 of the GST Act to include currency (whether of Australia or another country). Therefore, your sale of Ether, in exchange for Australian currency, is a supply. However, your supply will not be a taxable supply to the extent that it is input taxed. | Detailed Reasoning - Input Taxed Supply: Subsections 40-5(1) and (2) of the GST Act provides that a financial supply is input taxed and has the meaning given by the GST Regulations. [9] Subsection 40-5.09(1) of the GST Regulations provides that: (1) The provision, acquisition or disposal of an interest mentioned in the table in subsection (3) is a financial supply if: (a) the provision, acquisition or disposal is: (i) for consideration; and (ii) in the course or furtherance of an enterprise; and (iii) connected with the indirect tax zone; and (b) the supplier is: (i) registered or required to be registered; and (ii) a financial supply provider in relation to supply of the interest. The provision, acquisition or disposal of an interest in or under Australian currency, the currency of a foreign country, digital currency or an agreement to buy or sell currency of either kind will be a financial supply under item 9 in table in subsection 40-5.09(3) of the GST Regulations (item 9) if the requirements under subsection (1) are met. You are a financial supply provider as the digital currency was your property immediately before you sold it in exchange for Australian currency. [10] Your disposal of your digital currency is made for consideration in the course or furtherance of an enterprise you carry on. You are registered for GST and your supply is connected with Australia as it is made through an enterprise that your director carries on through a fixed place in Australia. Therefore, your supply of digital currency is input taxed as it meets the requirements under subsection 40-5.09(1) of the GST Regulations. You are not liable to pay GST on your sale of Ether in exchange for Australian currency. | Detailed Reasoning - Question 4: Are you entitled to a GST credit for expenses that you have incurred in relation to the services that you supply to the overseas cryptocurrency mining pool? | Summary: Yes, you are able to claim GST credits for the GST included in your creditable acquisitions in relation to providing services to an overseas cryptocurrency mining pool, provided you hold a valid tax invoice. | Detailed Reasoning - Detailed Reasoning: You are entitled for a GST credit for any creditable acquisitions you make. [11] 'Creditable acquisition' is defined under section 11-5 of the GST Act: (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. [12] As discussed under question 2, your supply of mining services is made in the course of an enterprise that you carry on. As your expenses do not relate to making an input taxed supply and are not of a private or domestics nature, they are made for a creditable purpose. You have provided, or are liable to provide, payment for these expenses and you are registered for GST. Where the expenses incurred are a taxable supply to you, you will meet all of the requirements under paragraphs 11-5(a), (b), (c) and (d) of the GST Act. Therefore, you will be entitled to claim GST credits for the GST included in your creditable acquisitions (in your activity statement) provided you hold a valid tax invoice. [13] [1] GST Act subsections 7-1(1), 9-40. [2] GST Act subsection 9-10(1). [3] GST Act section 195-1 (definition of 'carrying on'). [4] GSTD 2006/6 paragraph 1. [5] GST Act subsection 195-1 (definition of 'indirect tax zone'). [6] See GST Act section 9-27. [7] GST Act sections 195-1 (definition of 'non-resident' and 'Australian resident'). [8] GST Act sections 7-1, 9-5, 9-40. [9] See also subparagraph 40-5.08(a) of the GST Regulations which provides that "... a supply is a financial supply if ... the supply is a financial supply under section 40-5.09 and is not excluded by section 40-5.12". [10] GST Regulations subparagraph 40-5.06(1)(a). [11] GST Act subsections 7-5(2), 11-20. [12] GST Act subsections 11-15(1), (2)(a)-(b). [13] See GST Act subsections 29-10(3) and 29-70(1).

Am I carrying on a business of mining digital assets?