Crypto Regulations in Australia 2024

Cryptocurrency and exchanges are legal in Australia. The laws here are also progressive. Over 1 million Australians, 5% of the population, own cryptocurrency. After the events of 2022, the government here decided to regulate the crypto market by adopting a tighter approach.

This module by Coinpedia covers aspects of the crypto framework absorbed by the Australian government in 2024.

Introduction

Australia has been considered a neutral and stable jurisdiction for blockchain and crypto businesses. The Commonwealth Government of Australia has enabled a growth driven approach for innovative financial services and the fintech sector. Australian regimes for the blockchain and crypto sector regulation have been very considerate. The digital assets have been covered by the anti-money laundering and counter-terrorism financing (AML/CFT) since 2018. Cryptocurrencies are treated as property in Australia. However, blockchain and cryptocurrency in Australia have always celebrated a neutral stance and stable market incentives, encouraging technological innovation in payments, crypto assets, lending, investment and custodial services. 

Is Crypto Legal In Australia?

Cryptocurrency and related exchanges have achieved legal status in Australia in 2017. Since then, Australian government interference has been very minimal in the industry. However, in 2018, crypto laws in Australia framed AML and CFT measures for the crypto realm. As a result, the Financing Act 2006 started including digital currencies in the AML and CFT regime. 

The government has employed a mild approach towards crypto usage in the country. However, due to the latest crypto crashes, they have been determined to adopt a more effective set of regulations when it comes to cryptocurrencies. Local jurisdiction does not treat crypto under any specific law. They are captured in the existing regulatory framework under the Australian laws. 

The Australian Securities and Investments Commission (ASIC) has specified that crypto assets form a part of exchange-traded products (ETPs). 

In 2013, Bitcoin’s legal status got clarified when the governor of the Reserve Bank of Australia (RBA) stated that there would be no force in the country to stop people from transacting in some other currency in a shop if they want to! There is no law in place to stop the usage of other forms of currencies.

Bitcoin exchanges are well regulated in Australia. In 2018, the Australian Transaction Reports and Analysis Center (AUSTRAC) began regulating Australian cryptocurrency exchanges. It ensured all Australian exchanges comply with Australia’s strict AML and CFT laws. Exchanges are required to register as an exchange, identify and verify users and maintain all the financial records. 

The current framework includes:

• The financial services reside under the Corporations Act 2001. Under current regulations, crypto assets that are or form part of an investment product or exchange traded product require an Australian financial services license (AFSL) or an exemption (see the Australian Securities and Investments Commission (ASIC) Information Sheet)
• The credit activities and services regime, where cryptocurrency lending activities would require a credit license under the National Credit Consumer Protection Act 2009 (NCCPA)
• The electronic transactions regulation for self-executing transactions using blockchain or distributed ledger technology, pursuant to the Electronic Transactions Act 1999
• The consumer law and unfair contract terms under the Australian Consumer Law (ACL), set out in Schedule 2 of the Competition and Consumer Act 2010

TimeLine of Crypto Regulations in Australia

2024

06 May 2024: Australia’s tax office(ATO) forced cryptocurrency exchanges to hand over transaction details of 1.2 million accounts. The ATO used the data to identify traders who failed to report their cryptocurrency-related activities, aiming to enforce tax compliance.

12 Apr 2024 : Australian Security and Investments Commission(ASIC) launched civil proceedings against two Australian cryptocurrency firms, NGS and DCA Capital, following their collapse, leaving investors owed over $160 million. Hundreds of Australian investors were out of pocket.

2023

30, Nov 2023: Australian Treasury introduces ‘Proposed Scams Code Framework’ to Battle Scams in crypto

Australia’s Treasury proposes the “Proposed Scams Code Framework” to combat scams, including sector-specific codes for banking, cryptocurrencies, and NFTs. The initiative addresses the increasing financial losses to scams in 2022. Consultation feedback is sought until Jan. 29, 2024.

16, Oct 2023: Australian Treasury Eyes Crypto Exchange Regulation, Excludes Individual Tokens

The Australian Treasury regulated crypto exchanges, mandating a financial services license under existing laws. To qualify for the same, the exchanges or brokers should hold more than $5 million in aggregate on their platform or more than $1500 for any individual customer. 

04 Sept, 2023 : Australian Legislators Decline Approval for Andrew Bragg’s Cryptocurrency Legislation

Australia’s Digital Assets (Market Regulation) Bill 2023 underwent delays, and the Senate Committee, in a report on Sept. 4, recommended against its passage. Dissenting Senators Bragg and Smith proposed amendments and urged considerations on tax and debanking issues.

29- Mar-2023: Australian Senator Proposes Private Bill for Accelerating Crypto Regulation

Senator Andrew Bragg introduced the Digital Assets (Market Regulation) Bill 2023 in the Australian Parliament, aiming to regulate cryptocurrency services, including exchanges, custody, and stablecoin issuance. The bill addresses consumer protection and investment promotion.

Taxation

Capital Gains tax applies in Australia when it comes to cryptocurrencies! ATO can track crypto usage in Australia well. Here, crypto is not seen as money or foreign currency. Instead, the ATO classifies crypto as property and as an asset for Capital Gains Tax purposes. This includes coins, tokens, NFTs and stablecoins. 

Depending on the transaction, crypto may also be considered as additional income and taxed as Income Tax. Income tax applies when one earns crypto by means of airdrops and staking rewards.

CGT on crypto in Australia:

As an investor, one needs to consider CGT (Capital gains tax) when he disposes of the cryptocurrency. Disposal may include selling crypto for Australian Dollar (AUD) or another fiat currency, swapping crypto for crypto, spending it on goods or services, and gifting crypto.

The net Capital gain made is paid at the income tax rate, depending on last year’s income.

However, Australian residents get a little relaxation with a number of tax-free thresholds and allowances that apply to crypto too.

• Tax free threshold: You’ll only start to pay Income Tax when you hit $18,200 in total income per year.
• 50% long-term capital gain discount: If you hold your cryptocurrency for more than a year before selling or trading it, you may be entitled to a 50% CGT discount.
• Personal use asset: You may get an exemption from capital gains tax if you spend crypto which is a personal use asset.

Good news is that certain crypto activities are tax-free in Australia! Here’s when you won’t pay tax on crypto in Australia:

• Buying crypto with AUD.
• Holding crypto.
• Acquiring crypto as a gift.
• Acquiring crypto from hobby-level crypto mining.
• Transferring crypto between your own wallets – but watch out for transfer fees.
• Purchasing goods and services with crypto – if the crypto is a personal use asset.
• Donating crypto to registered charities with Deductible Gift Recipient (DGR) status

Mining is taxed on the basis whether one is a hobby miner or trader. The mined coins will be subject to CGT on disposal. Personal use asset exemption does not apply here! A person doing mining in a large-scale business operation is a commercial miner. The tax treatment here will follow the trading stock rules strictly! 

Conclusion

With the latest crypto crackdowns in the market, the Australian government regulated the crypto space in the country to adhere to some policies which will protect the consumers from frauds and thefts. The place has always been neutral towards crypto and adapts to this evolving space very quickly!