According to the Australian tax official, the possibility is left open that Bitcoin payment system could be considered legal tender in the country. As you know, Bitcoin is usually referred to as a type of “virtual currency”, where any users are able to pay for goods and services, and even create their own coins to generate more currency.

However, everyone who is using Bitcoins on a regular basis or trying to make investments in it should know that governments around the world continue to grapple with whether the virtual money could be considered currency or they should be referred to as some other form of personal property. In its turn, the way how cryptocurrencies are defined would have broad ramifications for how Bitcoins are handled by both consumers and governments. This issue also includes the question of how such money are dealt with under national taxation systems.

Recently, an Australian tax commissioner named Chris Jordan admitted there was a push by some proponents to have cryptocurrencies treated like real (fiat) money. However, the official also added that it did not meet the current definition of legal tender. Thus, the commissioner had to leave open the possibility that the issue could be resolved in the future.

Chris Jordan explains that the Tax Act provides a definition of money. It’s got to be the legal tender of a country, while it can’t be called money. At the same time, he admitted that if the currency develops further, maybe the definition would need to change. In its turn, this would cause amendments to the Tax Act by the Federal Parliament.

Earlier this month, the tax office issued guidance saying that Bitcoin was regarded an “intangible asset” under the country’s taxation system. In other words, Bitcoins were subject to the GST.

According to the tax office senior assistant commissioner, Michael Hardy, the ATO has been consulting with cryptocurrency experts, businesses, industry bodies and other external stakeholders for a while now, in attempts to design the guidance and explain the obligations of Bitcoin holders. Michael Hardy encourages everyone involved in trading Bitcoins or other cryptocurrencies, both individuals and businesses, to read the guidance of the tax authority to find out what obligations they undertake when buying or selling Bitcoins with a mouse click. The authority adds that if your circumstances aren’t described by the guidance, you are free to seek a private ruling by contacting the authority.

People will just use their bitcoins as a 'hidden' source of cash, keeping it outside the tax system. If you only buy and sell in bitcoin & keep your profits away from your bank accounts, then there is not much they can do.