Bitcoin and cryptocurrency trading in Australia
Tightening up
A wave of crypto-related scams – not to mention the worldwide price drops in cryptocurrencies – has led to increasing calls for more regulation on the growth of the crypto economy in Australia, more specifically in the area of consumer protection. The Australian Competition and Consumer Commission (ACCC), confirmed has stated it wants to support the crypto industry but notes challenges with regulating such innovative technologies and it’s likely that Australia’s Labor Party will need to initiate some form of progressive crypto policy. The years of light-touch regulation and ambitious crypto advertising that have led to Australians investing heavily in crypto may need to be reigned in according to critics of the incumbent political party. This follows signs from the Australian Central bank that, as yet, it has no plans to initiate a CBDC for mass consumption in the same way that China has. The Australian Taxation Office ATO has also outlined crypto capital gains as a topic for reassessment.
Australia has taken a highly positive approach to regulate crypto exchanges for consumer protection and harnessing the advantages of blockchain technology in the mainstream financial sectors. The country also has a thriving crypto investor base with a high number of ATMs.
As of March 2022, Australia continues its rise up the charts, offering the possibility of a retail central bank digital currency (CBDC) to take its place within the country’s booming payments industry. A CBDC is not the same as cryptocurrency as it is not completely decentralized, and thus within the control of a single body but simply marks a more convenient way to pay without the use of traditional cash, as such.
However, more importantly, the move shows Australia’s progressive approach to redefine its payments system and embrace developments in digital currency. Australia’s government is looking to consult on regulating businesses that hold or offer custodial services on behalf of consumers. Effectively, the country now acknowledges that the crypto economy is supporting significant sums of money and represents an ongoing investment demand.
The number of people transacting in cryptocurrency in Australia continues to grow, more than doubling over the previous year so far. This growth may, of course, change following the early year Bitcoin price falls. Nevertheless, the country is considering establishing some sort of licensing framework for digital exchanges, allowing the purchase, holding and sale of crypto assets by consumers in a regulated environment. All in all, it’s another steady but positive step forward for investors who are perhaps looking to add crypto to their investment strategy but seeking clarity and confidence.
Law and crypto trading in Australia
Legal - existing crypto legislationThe good news is that investing or trading in cryptocurrencies such as Bitcoin is legal and regulated by the Australian Securities and Investments Commission (ASIC).
Just remember that the Australian Tax Office (ATO) has strict Government guidelines on trading that require crypto exchanges (the online platforms that buy and sell your bitcoins) to share your trading data with the ATO for tax purposes.
So, if you decide to invest in any cryptocurrency you need to keep records of your dealing.
If you want to trade bitcoin there are a number of well-established crypto exchanges that make it easy and straightforward to buy*, sell and invest in Bitcoin (BTC) and other cryptocurrencies.
Legal - forthcoming crypto legislationBitcoin, along with any other cryptocurrencies is now treated as property for tax purposes. This means that they’re subject to Capital Gains Tax, just as with any other property. Before this cryptocurrency was subject to double taxation under the country’s goods and services tax (GST).
Taxing cryptocurrencies in Australia
Income Tax
As with the UK and many other countries, there are no taxes on buying or holding cryptocurrencies in Australia. Cyptocurrencies have been declared legal in Australia and have to follow the Anti-Money Laundering and Counter-Terrorism Financing Act.
If you’re resident in Australia, buying or trading Bitcoin for gain will be subject to income tax and Capital Gains Tax (CGT) and the Australian Tax Office will know about your trading.
In a nutshell, if you exchange or sell your Bitcoin for goods, cash or other cryptocurrencies it will be deemed to be a ‘disposal’ and subject to the prevailing tax laws. Any gain or loss you incur will have to be shown on your tax return and you can carry any losses forward to offset future gains. As an individual, the percentage you pay on Capital Gains Tax is the same as your income tax rate for the year. Once again, keeping records is vital.
Tax relief
As an individual investor, you’ll enjoy a 50% discount on tax if your crypto is held for 12 months or more. Any gain or loss you incur will have to be shown on your tax return and you can carry any losses forward to offset future gains.
Tax when moving residency
As with any income, your bitcoin will come under the tax laws of the country you become legally resident. If you set up a business to trade bitcoin, that business will come under the tax laws of the country it operates from.
Tax on mining
It’s highly technical and beyond the scope of most individuals but mining for bitcoin falls under standard Australian Income Tax Law.
Your ‘mined’ coins will be valued at their market price and the whole of that amount subject to standard income tax. Don’t forget, if you mine bitcoin and sell it for profit sometime later, that additional profit – between its value when you mined it and what you sell it on for – also incurs CGT.
Taxes
| Taxable income | Tax on this income | Tax on excess |
| 0 – $18,200 | 0 | 0% |
| $18,201 – $45,000 | 0 | 19% |
| $45,001 – $120,000 | $5,092 plus 32.5 cents for each $1 over $45,000 | 32.5% |
| $120,001 – $180,000 | $29,467 plus 37 cents for each $1 over $120,000 | 37% |
| $180,001 and over | $51,667 plus 45 cents for each $1 over $180,000 | 45% |
* All income is taxed at ordinary income tax rates
** 50% reduction of long term capital gains (CGT discount)
https://www.ato.gov.au/rates/individual-income-tax-rates/
Ways to reduce your crypto taxes
- HODL crypto to realize long term gains over short term
- Harvest your tax losses
Tax Year and When to File
| Tax Year | July 1 – June 30 |
| Tax Due Date | October 31 |
| Tax Authority | |
| Crypto Tax Guidance | |
| Accointing Tax Guide |
Crypto financial services in Australia
Investing in bitcoin for retirement funds is legal in Australia but is viewed as a ‘high-risk’ strategy. The ATO discourages investors from ‘placing all their eggs in one basket’ and building up too large a retirement fund with them.
In Australia, a leading mainstream bank, the Commonwealth Bank of Australia, has partnered New York-based exchange Gemini Trust Company LLC to offer a crypto exchange and custody service through its mobile banking app. A trio of leading banks have instigated the first-ever blockchain product to be used in commercial banking in Australia demonstrating how implementing blockchain can create digital bank guarantees.
Australia’s financial and technical sectors are eagerly engaging in the assessment and analysis of Defi, with a number of high-profile projects in the DeFi space. Australia is said to be at the forefront in DeFi-related projects.
Using crypto in Australia
Australia is very open to accepting Bitcoin payment in many retail and service sectors from dentistry to dining out! In fact, Melbourne is known to be a leading city in the use of bitcoin payments. In most cases it is possible to buy vouchers with your currency that may then be indirectly used with participating outlets*.
You can’t avoid being eligible for tax on your coins by gifting them to someone, but there are concessions for gifting your asset to a recognized charity. However, cryptocurrencies are becoming a popular gift and any established and reliable crypto-exchange will be able to advise you on gifting your investment coin or coins to a third party. Other activities with your Bitcoin, such as lending it or gaining interest are also subject to income tax.
Crypto regulation in Australia
Many of the leading exchanges that operate globally carry some form of insurance against mishaps (usually fraud or technical breakdowns) so it’s worth checking if your chosen exchange has insurance – the complexity of obtaining redress through the regulatory system is difficult in most countries – often dealt with on a case-specific basis.
Cryptocurrency exchanges are required to hold an Australian Financial Services (ASF) licence, whereby digital currency providers are viewed alongside other financial service providers under Australian law.
The crypto asset, such as a token, is viewed as a financial product under the Corporations Act in order to assure consumers that they are buying a form of regulated financial product. On top of this, Consumers have to be provided with fee structures and guidelines.
You’ll need to provide your personal details and proof of ID and all Australian exchanges are regulated and must comply with AUSTRAC’s AML/CTF reporting obligations.
