Australia to Implement Cryptocurrency Regulations in 2024
Cryptocurrency and exchanges are fully legal in Australia, and the country has a progressive approach to regulating the crypto market. In fact, around 1 million Australians, which is about 5% of the population, currently own cryptocurrency. After the events of 2022, the Australian government decided to take a tighter approach and implement regulations in the crypto market.
This article by Coinpedia explores the crypto framework adopted by the Australian government in 2024.
Introduction
Australia has established itself as a neutral and stable jurisdiction for blockchain and crypto businesses. The Commonwealth Government of Australia has fostered a growth-driven approach to innovative financial services and the fintech sector. The regulations surrounding blockchain and cryptocurrency in Australia have been thoughtful and considerate. Since 2018, digital assets have been subject to anti-money laundering and counter-terrorism financing (AML/CFT) measures. In Australia, cryptocurrencies are treated as property. The country has always maintained a neutral stance and stable market incentives for blockchain and cryptocurrency, which has encouraged technological innovation in areas such as payments, crypto assets, lending, investment, and custodial services.
Is Crypto Legal In Australia?
Cryptocurrency and related exchanges obtained legal status in Australia in 2017, and since then, the government has had minimal interference in the industry. However, in 2018, the government introduced AML and CFT measures for the crypto realm. As a result, digital currencies were included in the AML and CFT regime under the Financing Act 2006.
The Australian government has generally taken a lenient approach to crypto usage in the country. However, due to recent crypto crashes, they have become more determined to implement effective regulations for cryptocurrencies. Currently, there is no specific law in place to govern crypto, but rather, it falls under the existing regulatory framework of Australian laws.
The Australian Securities and Investments Commission (ASIC) has clarified that crypto assets are considered part of exchange-traded products (ETPs). In 2013, the legal status of Bitcoin was clarified by the governor of the Reserve Bank of Australia (RBA), who stated that there would be no restrictions on people transacting in other currencies if they wished to do so. There are no laws preventing the usage of alternative forms of currencies.
Bitcoin exchanges in Australia are well-regulated. In 2018, the Australian Transaction Reports and Analysis Centre (AUSTRAC) began regulating Australian cryptocurrency exchanges to ensure compliance with AML and CFT laws. Exchanges are required to register, identify and verify users, and maintain financial records.
The current regulatory framework includes:
– The Corporations Act 2001, which governs financial services.
– The National Credit Consumer Protection Act 2009 (NCCPA), which covers cryptocurrency lending activities.
– The Electronic Transactions Act 1999, which regulates self-executing transactions using blockchain or distributed ledger technology.
– The Australian Consumer Law (ACL), set out in Schedule 2 of the Competition and Consumer Act 2010, which governs consumer law and unfair contract terms.
Latest Regulations in 2024
In October 2023, the Australian government released its long-awaited regulatory framework proposal. Under this proposal, crypto exchanges will be required to hold a financial services license issued by the Australian Securities and Investments Commission. To qualify for this license, exchanges or brokers must hold more than $5 million in aggregate on their platform or more than $1500 for each individual customer. The draft bill outlining these regulations is expected to be released in 2024.
Taxation
In Australia, capital gains tax (CGT) applies to cryptocurrencies. The Australian Taxation Office (ATO) has the ability to track crypto usage within the country. Cryptocurrencies are not considered money or foreign currency in Australia. Instead, they are classified as property and assets for the purposes of CGT. This includes coins, tokens, NFTs, and stablecoins.
Depending on the transaction, crypto may also be considered as additional income and taxed accordingly. This applies to earnings from airdrops and staking rewards.
When it comes to CGT on crypto in Australia:
– Investors need to consider CGT when they dispose of their cryptocurrency. Disposal can involve selling crypto for Australian dollars or another fiat currency, swapping crypto for crypto, spending it on goods or services, or gifting it.
– The net capital gain is taxed at the income tax rate, based on the individual’s income from the previous year.
However, Australian residents enjoy certain tax-free thresholds and allowances that also apply to cryptocurrencies:
– The tax-free threshold is $18,200 in total income per year.
– There is a 50% long-term capital gain discount if the cryptocurrency has been held for more than a year before being sold or traded.
– An exemption from capital gains tax may be granted if the crypto is considered a personal use asset.
– Certain crypto activities are tax-free, including buying crypto with Australian dollars, holding crypto, acquiring crypto as a gift, acquiring crypto from hobby-level mining, transferring crypto between personal wallets (excluding transfer fees), purchasing goods and services with crypto (if the crypto is a personal use asset), and donating crypto to registered charities with Deductible Gift Recipient (DGR) status.
Mining is taxed differently depending on whether it is done as a hobby or as a business operation. Mined coins are subject to CGT upon disposal, and the personal use asset exemption does not apply to mining as a commercial operation. Commercial miners must adhere to the trading stock rules for tax treatment.
Conclusion
In response to recent crypto market developments, the Australian government has implemented regulations to protect consumers from fraud and theft. Australia has always maintained a neutral stance towards cryptocurrency and has been quick to adapt to the evolving space.