Cryptocurrency regulation

Cryptocurrency Regulations in Australia

Written by: Qadir AK

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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Apr 9, 2022

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Cryptocurrency and blockchain in Australia are considered Powerful and legal assets. Several legislative developments have been made recently, followed by the official adaptations by The Government and Other financial regulators since 2013.

In recent years there is a Sharp rise in Crypto and Blockchain users. The Australian market is a Legalised and Auditable Network, You can be candid using cryptocurrencies for business or trading on Crypto exchanges, but your profit would be taxed as well. 

​​So, what’s happening in the Australian cryptocurrency regulations? Below is the timeline of a series of events and announcements taken towards the crypto industry. Let us find out more!!

Australia Crypto Regulations 2022

04-04-2022: Now crypto is appreciated as payment in Australian OTR.

convenience store and gas station giant On The Run OTR around 170 stations in South Australia and Victoria will also accept the virtual currency in the form of payment now, which the customer will be allowed to pay for gas, snacks, and food over 30 cryptocurrencies. 

06-04-2022: Australian watchdog tough new rule to wipe out crypto influences.

new rules introduced in Australia may soon wipe out the digital currency influencers, and the companies may also penalize millions of dollars for using them to promote their products. The new guidelines have imposed strict restrictions on financial influencers by imposing penalties for violators. 

21-03-2022: SBF excited to launch FTX: Australia.

CEO Bankman Fried says that The establishment of FTX Australia would provide confidence in trading on a registered and licensed platform. The leading crypto exchange has announced the launch of FTX, taking a step ahead to expand FTX globally.

Cryptocurrency Taxation 

The taxation of cryptocurrency has been an area of debate, despite repeated attempts by the Australian Taxation Office(ATO) to clarify it.  The ATO considers cryptocurrencies as an asset held or traded, instead of a currency. You can read more about Tax Treatment for Crypto in Australia 

In a very Recent News,  ‘These taxation regulations are likely to be violated and thus the Australian Tax Office ( ATO ) warned the Traders and sent official notices to do the Auditing Cryptocurrency transactions of the previous financial year. 

The tax implications on the investors and holders depend on the intended use of cryptocurrencies. CGT Capital Gains tax is applicable for all the crypto transactions in Australia, activities such as selling or gifting crypto, trade or exchange crypto, converting crypto to fiat currency, using crypto to obtain goods or services.

 Investors in the business of trading cryptocurrency are subjected to the trading stock provisions. The gains on the sale of cryptocurrencies are treated as revenue and are taxable under CGT. The loss also is deductible on a similar basis.

An ICO which is a coin issued by an entity either by an Australian Tax resident or acting through an ‘Australian Permanent Establishment’ is likely to be taxable in Australia. The current corporate tax rate is either 27.5% or 30%. If the issued coins are considered as equity for Tax purpose, then ICO proceeds should not be taxable to the issuers. But all the future returns will be treated as dividends.

With effect from 01 July 2017, suppliers of digital currency are not required to charge GST nor the purchaser is entitled to any GST refunds. The digital currency, if used as a mode of payment alternative to money, normal rules of GST, would be applied for the payment and receipt of digital currency.

The digital Currency in the GST legislation requires the following characteristics,

  • It should be fungible so that it can be used as a payment mode for any purchase.
  • It is available for the public without any restrictions.
  • It should not be denominated by any country’s currency.
  • The value of the digital currency should not be derived from or dependent on anything else.
  • It does not give any right or privileges to receive something else.

Cryptocurrency mining

Cryptocurrency mining is legal in Australia as long as you use your own resources such as electricity and processing power. But the ATO doesn’t seem to be convinced with this freedom of Crypto miners or Australian business owners. The ATO  Introduced lines that add taxation to the cryptocurrency mining activities as well.

Income derived by carrying out cryptocurrency mining as a business should be included under assessable income. Crypto miners would also be subjected to tax on any gains or profits derived from transferring mined cryptocurrency to third parties. Cryptocurrency cloud-based mining activities in Australia should consider cybersecurity-related issues too.

The registered exchanges are required to carry out the Know-your-customer process to monitor and report suspicious transactions. Exchange operators are also required to maintain the customer’s data for a period of seven years.

Historical Events and Announcents

24-03-2021: SBF opens Aussie as the government says we are open for business. Sam Bankman-Fried, CEO of FTX said the world is looking for a CryptoHub in APAC. FTX CEO Sam Bankman-Fried gave the opening keynote at Blockchain week with events held at the headquarters of the Australian Securities Exchange(ASX) on day one.

24-06-2020:- Local cryptocurrency exchange Bitcoin.com.au collaborated with the post offices in Australia. This partnership has enabled the exchange customers to buy Bitcoin in the post offices.

01-04-2020:- Australia’s first and top cryptocurrency exchange CoinSpot has been given the International Organization for Standardization(ISO) stamp of approval for its security system.

29-02-2020:- A court in Australia has accepted the use of a cryptocurrency exchange account as a security for potential legal expenses. The judge acknowledged the volatile nature of digital assets and concluded that cryptocurrencies are a form of investment in certain financial times.

10-10-2019:- Australia’s Perth Mint, one of the world’s largest refineries, launched a gold-backed Ethereum coin guaranteed by the government of Australia. Ethereum blockchain technology was used to digitize government gold.

28-08-2019:- An Australian IT security consultant, Craig Wright, who claimed Satoshi Nakamoto, the creator of Bitcoin, had to hand over half of his bitcoin holdings. He was sued by the estate of David Kleiman, a programmer who died in 2013. Kleiman estate alleged that Wright and Kleiman were partners from 2009 to 2013 and hence his family is entitled half of the bitcoin mined by both together.  

31-05-2019:- ASIC issued updated guidance on ICO’s and crypto-assets which would be termed as ‘financial products’.All the FAQ’s related to ICO’s or crypto-assets were addressed. The guidance also included information about licenses for the crypto-assets participants applicable under Australian law.

08-03-2019:- AUSTRAC suspended two crypto exchanges after the companies were being used for drug trafficking. This was the first suspension after the AUSTRAC was given the responsibility of the authenticity of the exchanges since April 2018.  

18-02-2019:- Australia’s Digital Transformation Agency(DTA) warned the government of the limitations of blockchain technology. The DTA team which worked to determine the stability of the blockchain technology discovered some gaps when used as a trial on some projects compared to other technologies. Hence DTA suggested to halt the experiments on these technologies and focus on the real-world applications that are available for immediate use.

07-09-2018:- The Australian Securities and Investment Commission(ASIC) released its corporate plan for 2018-2022 which provided a framework for cryptocurrencies. 

26-03-2018:- The Australian Taxation Office(ATO) conducted a survey to get public feedback on the new taxation laws implemented on cryptocurrencies. They wanted to know the impact on the taxpayers with the real-time issues faced by them and convey it to the government.

25-01-2018:– Brisbane Airport is all set to become a cryptocurrency airport terminal. The airport is working with the local authority and international companies to make the entire airport including stores, coffee shops Bitcoin-friendly by accepting them.

07-12-2017:- The Australian Government passed the amendments to the Anti-Money Laundering and Counter-Terrorism Act 2006. In the new law, the digital exchanges are required to maintain know-your-customer procedures and monitor & report suspicious transactions to AUSTRAC.

18-10-2017:- Australia approved to remove the double taxation on digital currency. The new legislation under the budget 2017-18 ensured digit asset holders will no longer pay Goods and Service Tax(GST).

07-08-2017:- Australian Senators from both the political parties announced that the Reserve Bank of Australia should recognize cryptocurrencies as official forms of currency. The Tax office hence stopped treating the digital assets as intangible property subject to GST.

20-03-2017:- Australian Securities and Investment regulator ASIC released guidance on the use of distributed ledger technology including blockchain technology in financial services and markets. This included an assessment of the technology and risk management standards.

01-04-2016:- The Australian Attorney General released a document stating that the government is willing to draft the legislative proposals to regulate digital assets by mid of 2017. The goal of the government would be to bring the cryptocurrencies under the law against money laundering.

31-05-2016:- Australian police authorities seized bitcoin worth $13 Million which was auctioned later. The police confiscated the bitcoins as proceeds of crime. It was the second such Bitcoin auction after the US Marshals service sold 144,000 Bitcoins seized from an online drug bazaar silk road.

August 2015:- The Australian Parliament’s Senate Economic reference committee published a report titled, ‘Digital Currency – Game Changer or Bit Player’. It emphasized the development of an effective regulatory system for digital currency, the potential impact of the technology on the economy and the possible advantages that could be utilized. A delegation also traveled to Canada and Singapore to discuss matters related to digital currencies with the government officials.

30-03-2015:- The Australian Treasury issued a whitepaper with respect to cryptocurrencies such as Bitcoin. It elaborated the challenges that could be faced to regulate them under tax laws and that the companies that deal with digital currencies may reallocate profits to minimize taxes.

20-08-2014:- The Australian Taxation Office(ATO) issued guidance on tax treatment for digital currencies. The ATO concluded that cryptocurrencies are neither money nor foreign currencies but can be considered as an asset for capital gains.

09-06-2014:- The governor of Bank of Australia, Glenn Stevens stated that digital currencies can pose regulatory questions. He further said that those investors who are ready to take up risks within the guesswork of the digital currencies should be allowed to do so.

24-06-2013:- Australian Taxation Office (ATO) confirms Bitcoin transactions are subjected to Goods and Service Tax(GST) as well as Income tax. Also told that bitcoin is expected to be a means of electronic payment or money.

Conclusion

With appreciation, Australia has dealt with cryptocurrencies in a better way. Cryptocurrency could be used as fiat currency but with some restrictions. Crypto lovers might have a good market place in Australia unless they do not indulge in any illegal activities. The future scope of any technology and its incorporation within the services of government is at a good pace. 

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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