Slashdot Mirror
The Tax Man Comes To Virtual Australia
shadrach_au writes to mention that what was being considered in the states is now apparently policy down under: your virtual assets can be taxed. The Australian Tax Office (ATO) is warning citizens to consider whether their gaming 'is a hobby or a business' and act accordingly. From the article: "If a virtual transaction has real world implications — if it can be attributed a monetary value — it attracts the attention of the Tax Office. Sites such as slexchange.com set rates for swapping Second Life's Linden dollars for 'real' money. 'The real world value of a transaction may form part of your taxable income, even if it is in Linden dollars,' the ATO spokeswoman says. 'In addition, there may be GST (goods and services tax) to consider.' In other words, if you are turning over the equivalent of more than $50,000 selling virtual jewelery to Second Life avatars, you must get an ABN (Australian Business Number) and register for GST."
My income is taxed.
Regardless of what service you provide, you should also pay taxes. Give to Ceaser what is Ceasers.
I wonder if I can pay taxes in World of Warcraft gold.
Somehow I suspect the Australian tax authorities won't accept payment in Linden dollars. (I suppose it depends how much their MPs are into Second Life...)
It's still a real world transaction, so it shouldn't come as a surprise that it's taxable.
If you design graphic artwork for a website, you get taxed when you get paid for the work, even though it's not something designed to be used outside of the computer.
Game pieces are really no different.
... otherwise it is taxation without representation, eh?
Do they provide/pay for any infrastructure in these virtual environments?
video games are real
first they take your guns... then they take what ever the hell they want.
I'm not sure why anyone would find this surprising. If you are making money by doing something, the taxman cometh.
n/t
I have no idea how second life works, but does this only include "virtual money" you convert to real money? How could you tax something that never get's converted to actual currency? Seems like a good way to bankrupt people who just want to play the game and not give a damn about making real money.
They're essentially declaring sovereignity over somene's else virtual world. Sort of like taxing all the satellites that fly over Australia.
Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. - Ronald Wilson Reagan
Circumcision is child abuse.
Would also make some interesting implications for family time, if the account is in your name and your kids are playing on it ...
But this apparently applies to pure virtual-world transactions, so long as they can "be attributed a monetary value". i.e. if you're paid in Lindens and never convert them to real money should you still be taxed? What about if you pick up an item - for your own use - in WoW that has monetary value, should you be taxed?
If I picked up the Redeemer weapon in UT2004 I could probably sell it for a few cents - should I be taxed for that value even when I don't sell it? How about if I get the high score on a Pac Man arcade machine, I could probably charge money to put someone else's name up there, it can "be attributed a monetary value"... taxable?
The only thing Caesar deserves is a knife in the back. Julius got his due.
Here's what I'm worried about:
If you sell a virtual necklace for 1000 virtual dollars, and those 1000 virtual dollars are worth $50 on the open real world market, then could you be taxed on that $50 regardless on whether you converted those 1000 virtual dollars to currency or not?
-Rick
"Most people in the U.S. wouldn't know they live in a tyrannical state if it walked up and grabbed their junk." - MyFirs
If you wait till later to pay the taxes currency changes can always get you.
Whenever you convert currency to calculate your gain/income, also convert enough of the asset to cover your tax liability.
You need to handle your L$ assets like any other foreign currency liability.
No, this is something different and stupid.
You'd support the government getting their cut when the "virtual" money is exchanged for real money. That's sensible. This issue is about treating in-game points (virtual money) WITHIN THE GAME, just because there are external agents willing to trade points for money.
I'll wander away from the SL mechanics itself for a more familiar example: You've just slain ten ogres with your ogre-slaying knife, +9 against ogres, or whatever. The ogres drop 200 gold. So you go to the shops and get a new helmet.
Should you be taxed on your "income" gained by slaying ogres?
Should you have to pay sales tax at the shops?
NO, OF COURSE NOT!
The fact that some yahoos will sell you 200 gold for five bucks is IRRELEVANT. You're playing a GAME. Tax the yahoos on the ACTUAL income they get for exchanging gold for money, sure. Tax ME for playing a game and slaying ogres? Morons.
Unfortunately, the best way to fix this is to take a step away from reality and call the gold "points" or "magic beans" or such. It breaks the suspension of disbelief, but it's the only way to keep this from happening. Politicians think the Internet IS a series of tubes: tubes that lead right into their pockets. Bastards.
You realize, of course, that this isn't unusual, right?
If you bought a home in the 1920's in a rural area with 0 property tax, and now a city has grown around you, you are now expected to pay property tax. NOT at the cost that you bought it for, but at it's potential resale value.
The belief is, that you are using the same services as your neighbours. Access to street cleaning, garbage removal, sewage services, etc. YOU may not have chosen for the city to grow around you, but you have no recourse.
This is one example. If you spend a few minutes, you will find countless other examples of taxation that occurs whether you spend the money today or not.
I've read the article (oh my!). It makes sense. If it were not possible to buy / sell their currency, it would not be taxable. Plain and simple.
Most EULA say you can not sell stuff for real money and some even ban you for doing it.
also the Second Life Terms of Service says
1.4 Second Life "currency" is a limited license right available for purchase or free distribution at Linden Lab's discretion, and is not redeemable for monetary value from Linden Lab.
You acknowledge that the Service presently includes a component of in-world fictional currency ("Currency" or "Linden Dollars" or "L$"), which constitutes a limited license right to use a feature of our product when, as, and if allowed by Linden Lab. Linden Lab may charge fees for the right to use Linden Dollars, or may distribute Linden Dollars without charge, in its sole discretion. Regardless of terminology used, Linden Dollars represent a limited license right governed solely under the terms of this Agreement, and are not redeemable for any sum of money or monetary value from Linden Lab at any time. You agree that Linden Lab has the absolute right to manage, regulate, control, modify and/or eliminate such Currency as it sees fit in its sole discretion, and that Linden Lab will have no liability to you based on its exercise of such right.
50,000 AU$ equates (based on Google's AU$->US$ conversion, and the current Purchase Rate estimate from the offical Lindex US$/L$ exchange) to somewhere over 10 Million L$. Figure is subject to drift of those exchange rates, but it gives you a decent enough yardstick.
/easily/ turns over that much, I'm sure.
That is a very, *very* non-trivial amount of in-game cash. You would have to be doing a massive number of sales, or selling insanely high-ticket items, to meet that sort of level of income. As a comparison, the most expensive "sensible" items I've seen might go for L$15,000 for a big multiplayer "Event Game" system (along the lines of Tringo / Slingo / Pizzeria and the like). You'd have to sell somewhere over 650 of those (presumably annually, if that's the reporting period for the initial AU$50k) to be in that sort of level of income - and the market for them just ain't big enough to sustain that, IMHO.
It could quite conceivably impact on professional "land barons" who deal in renting/selling large amounts of land, depending on the scale of their business. Anshe Chung's business
But this seems to go further. If I read it correctly it seems to want to tax online wealth on the presumption that it can be turned into real wealth not wether you actually do that.
If I sell my WoW trinket for X dollars then that is income from labour. Tax it.
If I sell my WoW trinket for X ingame gold pieces then just because some people trade their ingame gold for real money doesn't mean I should be taxed for the number of gold pieces I have.
if this will be the case then in essence the australian goverment is going to A force players to go into the gold market and B ruin games. Australians will have to farm not just to meet their avatars need but also to pay the taxman.
I see real trouble in trying to tax virtual wealth. Just imagine what happens when WoW looses your account. All of sudden according to australia that could mean a real significant financial loss.
Tax real world income no matter were it comes from, but pure virtual "wealth" is non-existant. It only gains meaning once I have converted it to real money and then that real money can be taxed.
After all, is the australian goverment really willing to follow through? Allow me to pay in WoW gold, allow WoW gold as colatoral, enforce the same laws regarding money transfers on blizzards game as they enforce on banks (if wow gold is real then it should be protected the same as any other real currency)
No, this is a hornests nest best left untouched
As an Australian, I know what a bunch of greedy bastards the ATO can be. And given that this was probably some sort of grandstanding by a senior official it doesn't surprise me that it is not that well thought out. Under current tax law, if I out lay money for a pure business then it can be considered an operating expense and used to adjust the taxable income. So by saying that you have to pay taxes on profits gained in the virtual world, that implies that expenses incurred from operating in the virtual world are also legitimate. So If I maintain a broadband connection for $50/month and plow in a further $50/month to play second life and plug my wares, of which I only average $20 worth/month, shouldn't that imply that I have had a net loss of $480 that may be written off that year? Plus power for the office, furniture etc....
You just know that they only saw $$$$ when they pushed that little ammendment through.
Also there is the issue of whether the transaction was on Australian soil and therefore subject to the ATO... Given the transactions happen in the USA, I'ld say no dice.
Who else read slexchange.com as sexchange.com, and immediately wondered at sex changes becoming so popular in australia that the aussies had made a special tax category for them?
They are saying that if you make profit in virtual dollars and even if you do not convert virtual dollars to real dollars, then you are still liable to pay tax (in real dollars!). The reasoning behind this is that theoretically everyone in australia could convert all their money into virtual dollars and then buy and sell services for the rest of their lives in virtual dollars never paying the tax office any money.
A similar system existed a number of years ago in Australia where a group of people set up a service sharing community. When you performed a service (or provided goods) to the community you received "Geckos" (their term for virtual money). If you were a plumber and you performed services for someone in the group you might receive a few hundred Geckos. You could then spend those Geckos on other goods/services that the community provided. The tax office realised that by using this virutal money system they were being deprived of taxation revenue that they would have otherwise received if the goods and services were being traded using real world money. They handed down a ruling stating that anyone using a system such as this was liable to add any virtual income to their real world income.
www.shortman.com.au - top shorted stocks on the ASX
This has interesting implications for citizens of America too. Every state has a reciprocal state tax arrangement with every other state: you earn income in only one state or another, so you cannot be doubly taxed by both states. Now, does this mean that any income earned in Second Life is subject to California state tax when it is converted from $L to $USD? Or is it only income when it is downloaded to a bank account in *your* state, thus bypassing California's tax system completely?
DNA is a Turing machine. You, however, being dynamic and emergent, are not.
Sure, yes, if a player converts her/his avatar's in-game resources into real world money, or accepts real world money from another person (presumably another player), taxes apply. No new laws needed.
But an avatar does not exit outside the game. The avatar is really the property of the game's owners, which is leased to a player for some period of time in exchange for some fee. (The visual appearance and/or textual description, however, might be the intellectual property of the player, depending on the terms of service for the game.)
Therefore, any in-game resources an avatar "owns" are actually owned by the game's owners.
Someone made an analogy to property taxes. What in-game services are being provided by a real world government? As best I can tell, none. Sure, the government provides infrastructure and protection for the organization(s) who own the game and/or host the game's servers, but any taxes the players might owe for such are being paid indirectly through the fees paid to the game's owners.
Granted, Linden Lab has complicated things by publishing an official exchange rate to purchase L$ using US$. But, even if they had not published a rate for purchasing L$ with US$, there would be no practical way to prevent the exchange of real world money for in-game resources, only make it hard. Players can still "sell" in-game resources privately through out-of-game means.
(I put quotes around the word, sell, because the player doesn't really own the in-game resources, though her/his avatar has (some) control over resources in her/his possession. The buyer risks loosing his real world money as the game owners have the right to take away those resources. Both players risk loosing their avatars and all in-game resources.)
I suppose a government might want to monitor in-game transactions on the assumption that transfers of resources between avatars represent parallel real world transfers of money, but trying to valuate a RW transfer by valuating an IG transfer would be very difficult. I just peeked at some in-game merchandise on slexchange. The prices bare little or no relationship to their real world counterparts. Examples: L$750 for jet-pack (to make an avatar fly) and L$1000 for a business suit. (Not saying these are unreasonable prices, just very hard to valuate.)
Avatars are not citizens of the real world. To the extent a player does not reach out from behind the curtain to "steal" an avatar's resources, those assets should not be taxable.
Don't try to out wierd me, three-eyes. I get stranger things than you, free with my breakfast cereal. --Zaphod Beeblebr
I don't really mind what taxes they place on us, it's not asif I pay them anyway :P
Let the commencement BEGINULATE!
buying and selling stocks works the same way - you only pay the tax when the money is exchanged for the stocks (when they are bought or sold). You don't pay tax ever time a stock goes up, you only pay when you sell it.
Why should online money (Linden dollars) be any different?
If I were these people though, I would be arguing that the income should count as a capital gain, not as business income. It's more like a capital gain than running a business.
This is so not news.
:)
Life is hard, in Australia we must pay tax on all income derived in Australia and abroad. This includes the net.
If I trade virtual services for virtual money, all good; If I convert those virtual services or monies into ACTUAL money or trade (vurtual services or money traded for a tangible good, such as a game "time card") it is subject to assessment.
If you have ANY business which generates more than 50,000 AUD (AUD, not wibblewubble dollars) income, you MUST register with the tax office.
This is just how our country works. Even if I sell something on ebay, I need to report that income if I got more for the item than I purchased it for, that MIGHT BE a "capital gain" and be taxable.
Once again, let us all shrink in horror that your income may be taxed by your government.
This is why I get involved in actively running down and helping ban goldfarmers in game; because if trading of in-game currency for real money becomes TOO prevalent, then the ATO will be within its rights to declare ALL in-game transactions as taxable. Such is the case with my Project Entropia account, fortunately I rarely make money, but my accountant includes my in-game transactions; converted to AUD at an appropriate exchange rate; in my declaration of foreign income. In fact, if a BUSINESS held the subscription, I could use my in-game losses to offset real life income for the business.
Swings and roundabouts
Obviously someone at the Australian Tax Office got busted at work using their computer in Second Life :
"Sorry Sir - but I was researching this 'virtual world' on the Internet where Australian taxpayers generate an income that is not being taxed"
Good little public servant - we must persue this matter - please continue your research.
Oh Bugger - what have i done ?
So does that mean I can claim my expenses for hardware and indeed my WoW subscription and even my DSL back on tax?