The Treasury has been monitoring Bitcoin in Australia both from a regulatory perspective and a tax perspective and believes that it is too soon to change taxation laws to provide a boost to local Bitcoin-based businesses.

"I think we will continue to assess the environment, but I would stress that it is an industry in its infancy, so I think to jump in and suggest that there should be changes to the tax law to accommodate it is a little bit early in that process," Kate Preston, general manager of the Treasury's Small Business Tax Division, said.

Treasury and Australian Taxation Office officials today fronted the Senate's inquiry into digital currencies, which is looking at the regulatory environment governing the use of Bitcoin and other crypto-currencies.

"I think the Treasury view would be [that] taxation is not where you start, where there's a lack of a sense from the Tax Office that the current laws aren't working," Preston said.

The establishment of the digital currencies inquiry followed the issuing last year of a set of draft ATO rulings, which have since been finalised, on the treatment of Bitcoin.

Under Australia's existing tax regime, Bitcoin is more akin to a commodity than a currency, the ATO ruled.

The decision has upset Australia Bitcoin businesses, representatives of which at an earlier hearing of the inquiry said that it could drive the nascent industry offshore into other, more-accommodating jurisdictions.

At the heart of the issue is the GST burden incurred by the use of Bitcoin. Under the ATO's ruling, businesses must charge GST when supplying the crypto-currency and when being paid in Bitcoin.

"We recognise in some commercial circumstances there can be double taxation," Michael Hardy, ATO senior assistant commissioner, told today's hearing.

"It's a feature of barter transactions," Hardy said.

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Too soon to change tax treatment of Bitcoin, Treasury says