Some countries have already managed to partially or fully recognize bitcoins. Australia is one of them. The government intends to become a leader in digital innovation. When drafting legislation, local authorities are relying on the experience of other regulators and the peculiarities of blockchain. Cryptocurrency in Australia has not yet been equated with money, but it is supervised. Part of the population uses digital assets for business purposes.
Regulation of cryptocurrency in Australia
Bitcoin along with other digital coins was recognized back in 2017. An official statement was made by the Reserve Bank of Australia. Four years have passed, however, this time was not enough for a full-fledged regulation. Local legislative bodies faced a number of problems.
Current laws
Coins found themselves in the legal field to combat money laundering and terrorist financing. The relevant provisions appeared in 2018. All local cryptocurrency exchanges and exchanges must register with the Australian Transaction Reporting and Analysis Center – AUSTRAC.
Depending on the digital asset use case, they fall under the current regulations:
- National Consumer Credit Protection Act 2009. The regulator notes the growing number of loans in digital coins. For such activities, the lender must obtain the appropriate license.
- Corporations Act of 2001. If cryptocurrency is used for collective investments, it falls under financial services regulation. In other words, participants will have to pay business tax.
Taxes
By October 2021, local authorities have yet to come up with specific laws. The IRS treats cryptocurrency as an asset to buy and sell, but does not equate it with full-fledged money.
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- Sale and exchange. Digital assets act as shares. Losses are deducted from income. If a person managed to earn, he is obliged to pay tax. Such activities can be considered as a business, but then many factors have to be taken into account: the presence of document flow, the regularity of operations, the extraction of profits and so on.
- Transaction. Each transfer is considered as a part of entrepreneurial activity.
- Mining. The user can mine coins with the help of specialized equipment or receive them at the expense of other tokens as a validator or network node. Such assets are treated as ordinary income. Miners fall under taxation if their annual turnover is more than 75,000 AUD.
- Issuer. The law provides for an ICO. The company is obliged to pay corporate tax 26-30%. Under the exception falls the issue of coins at the expense of borrowed capital.
If the amount of investment is less than 10 000 AUD, the user is exempt from paying taxes.
The calculation takes into account income not only from investments in coins, but also from other sources:
| Amount of profit | Rate | Tax |
|---|---|---|
| 0 – $18 200 | 0% | Zero |
| $18 201 – $45 000 | 19% | $0.19 for each $1 over $18,200 |
| $45 001 – $120 000 | 32,50% | $5092 + $0.325 for each dollar if the amount is greater than $45,000 |
| $120 001 – $180 000 | 37% | $29,467 + $0.37 for every $1 if the amount exceeds $120,000 |
| From $180,001 | 45% | $51,667 + $0.45 for each dollar in excess of $180,000 |
Suppose a user bought BTC for $50,000. A few months later, he sold the asset for $70,000. The net gain amounted to $20,000. In addition, the taxpayer received income from other sources in the amount of $20,000 for 1 year. The total gain is $40,000. The tax is calculated using the formula:
($40 000 – $18 200) * 0,19 = $4142
Consumer Protection
Regulators intend to develop a mechanism for safe storage of cryptocurrency. Users must be assured that their coins will not be stolen.
In October 2021, Australia passed a new law that gives law enforcement agencies the right to freeze digital assets. This is due to an increase in fraud and theft. The effectiveness of the law remains controversial, as police need direct access to a wallet in order to freeze it.
The country also has a competition and consumer protection law from 2010. Companies are prohibited from misleading users. Promotional materials and articles must not contain false information.
Australia’s financial services regulations
The circulation of coins is monitored by several regulators:
- Reserve Bank.
- The Securities and Investments Commission.
- The Transaction Reporting and Analysis Center.
Regulators have a negative view of sensitive cryptocurrencies. Exchanges and exchanges have had to remove coins that have a higher level of anonymity.
Mining
Users can mine cryptocurrency but must pay taxes. There are several large-scale mining operations in Australia.
Local regulators are mainly concerned about the rise of malware. Hackers are spreading viruses for illegal mining using unauthorized equipment.
Future regulations
Laws need to be finalized. A Senate committee made further recommendations at the end of October. The amendments concern a number of items:
- Anti-money laundering principles.
- Taxation regulation.
- The development of programs for the safe storage of coins.
The proposals will not be adopted until 2022.
Australian cryptocurrencies and tokens
Several local companies are working with blockchain technology:
| Name | Ticker | Description |
|---|---|---|
| Bata Barter Platform | BTA | A digital asset for exchanging funds with instant transfers and zero fees |
| CanYa | CAN | Freelancing Exchange on Blockchain |
| Hut34 Entropy | ENTRP | A network of chatbots for data exchange |
| Havven | HAV | Payment system for retailers |
| Horizon State | HST | Voting platform |
| IvyKoin | IVY | An alternative to Ripple for international payments |
| NITRO | NOX | A trading platform for game developers, investors and studios |
Australia’s national cryptocurrency
In 2020, the Reserve Bank announced a partnership with Commonwealth Bank, National Australia Bank, Perpetual and ConsenSys Software to create CBDC, a digital currency for wholesale trading. The project is in the research phase. For now, the regulator is exploring the efficiencies, risks and innovations of using blockchain in wholesale markets.
Summary
It is legal to use cryptocurrency in Australia. The main obstacle to the inflow of investment remains the progressive tax. With income from $180 thousand will have to give 45% of net profit.
The state does not intend to restrict the population from digital assets. First of all, regulators are concerned about the degree of security. The government is looking for effective ways to counter cyberattacks and fraud. Perhaps in the future, government wallets will be developed to store coins.
Frequently Asked Questions
⏳ When do I need to report to the IRS?
Every year no later than May 14.
🕤 When will there be a national cryptocurrency in Australia?
The Reserve Bank has announced its intention to create a national coin on blockchain, but is still exploring the potential opportunities and risks of such innovations.
❓ Are there benefits for investors?
Yes. If an investor holds assets for more than 12 months, they get a 50% tax rebate.
❕ Who can help with proper reporting?
There are several companies in Australia: Swyftx, Crypto Tax Calculator and KoinLy.
⛔ What are the penalties for violations of the rules?
Individuals most often receive fines, but some offenses carry jail time. For example, the owner of an exchange without a license can be imprisoned for 2 years.
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Author: Saifedean Ammous, an expert in cryptocurrency economics.
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