The Legality of Bitcoin in Australia
October 22, 2020
Is Bitcoin legal in Australia
In Australia, Bitcoin has been declared legal by the governor of the Reserve Bank of Australia (RBA) since December 2013. Since then, cryptocurrencies have become quite popular in the past couple of years. In saying this, Bitcoin is still quite new to many people. So if you are new or a crypto enthusiast and living in Australia, you might have wondered, is Bitcoin still legal in Australia?
Bitcoin is one of the most popular cryptocurrencies in the market. It was launched in 2009, by a mysterious entity, Satoshi Nakamoto. 1 Bitcoin in AUD is worth around $14,994 (at the time of writing this article).
With Bitcoin being legal in Australia, there’s a lot you can do with the cryptocurrency as it isn’t related to the Australian financial market. Bitcoin opens up a new financial dimension that is not prone to market changes, and not under the control of the government or even remotely affected by government regulations. It is possible to pay for goods and services with Bitcoin, purchase Bitcoin from Zipmex, or even participate in crypto trading. Once on the cryptocurrency exchange you can even transfer Bitcoin to AUD.
In this article, we will talk about Bitcoin being safe for Australians and its legality in Australia. We will also have a look at Australian tax regulations on Bitcoin.
Is Bitcoin Safe and Legal in Australia?
Bitcoin is a decentralised digital currency, and Australia was one of the first countries to catch on to its hype. Although its crypto market is not the largest in the world, it is growing at a tremendous rate.
Even though Bitcoin was marked legal by the Australian RBA governor, there have been some concerns with its legality. This is mainly because, in 2019, over $515 million in Bitcoin was spent on illegal activities which may have included money laundering. Although this is just 1% of Bitcoin transactions, it is still a major concern.
Being a decentralised currency, Bitcoin protects the privacy of its users. Meaning, anyone can anonymously transact Bitcoins on the network. Many cryptocurrency exchanges require their users to perform KYC, but there may be some illegal vendors who provide Bitcoins for illicit activities such as money laundering.
The Bitcoin network (or blockchain) maintains a public ledger where it keeps track of public addresses and their Bitcoin transactions. So with the help of public address, you can track the crypto balance and transactions of various individuals.
However, Bitcoin‘s decentralisation is both advantageous and disadvantageous. With no government (even the Australian Government) controlling this cryptocurrency, people can easily move assets from one country to another. Due to this concern, some nations have already placed a ban on cryptocurrencies or put in place anti money laundering policies for cryptocurrency users and exchanges.
It is quite different from traditional currency and also safer in many ways. Hackers cannot exploit your bank account or credit card details and gain access to your cryptocurrency. Your crypto coins are stored in your digital wallet, which is protected by your private key. Unless someone gains access to your private key, your crypto balance is safe.
The Australian Tax Office (ATO) does not consider Bitcoin to be an Australian currency or a foreign currency. It is instead considered as an asset that is subject to capital gains tax, based on your tax classification. So before you purchase any Bitcoin, consult your accountant to discuss your tax classification and any tax implications that you may encounter while dealing with cryptocurrencies.
The Australian laws do not mention Bitcoin to be illegal, but this may vary from country to country. Countries like China, Russia, Nepal, Ecuador, Bangladesh, etc. have outright banned Bitcoin and any services related to the cryptocurrency as it is considered as a threat to their current financial systems.
How can I buy Bitcoin?
If you are looking to purchase or trade Bitcoin, you can head over to Zipmex. Zipmex is the leading crypto exchange in Australia for the top digital currencies. Although Zipmex is a global cryptocurrency exchange, it provides local support and some of the lowest prices.
Zipmex is also popular for its immediate deposits and fast trading capacity for digital currencies. The cryptocurrency exchange provides an easy-to-use interface for all users. All you need to do is register an account on the website, and you can buy and sell bitcoin online.
Do you pay tax on Bitcoin?
Bitcoin is a digital currency that uses a cryptographic encryption system. It is not printed by any central bank. Bitcoins are generated by Bitcoin mining, which is a process taken care of by powerful hardware or computers. People can mine Bitcoin or purchase it from cryptocurrency exchanges.
Although Bitcoin is a decentralised cryptocurrency, it is no less than the leading world currencies such as the US dollar, Euro or even the Australian dollar. In the beginning, Bitcoin was used for transactions to avoid tax obligations. But the governments caught on, and they realised that Bitcoin could be used for illegal activities.
Many tax authorities around the world have tried to bring Bitcoin under the tax radar. Bitcoin is considered as an asset or intangible property. The US Internal Revenue Service (IRS) and many other countries treat Bitcoin in the same manner.
Governments are forcing regulations where anyone has to report their virtual currency transactions no matter how small the value. The following bitcoin transactions are taxable:
- Selling bitcoins that you mined personally to a third party.
- Selling bitcoins that you purchased from someone to a third party.
- Making use of bitcoins, mined or bought from someone to purchase goods or services.
Transaction Bitcoins that you have mined are taxed as personal or business income whereas Bitcoins that were bought from someone are taxed as investments in an asset.
If Bitcoins are held for less than a year, then you are subjected to short-term capital gains tax. Whereas holding bitcoins for more than a year makes you applicable for long term capital gains.
Seek your accountants help and record your buy and sell orders
Bitcoin hasn’t been illegal in Australia ever since the RBA deemed it legal in 2013. However, the taxation of Bitcoin isn’t as easy as it seems. It is difficult to conclude the fair value of the cryptocurrency on purchases and sales. As this is the case we recommend you seek the advice of your accountant. Plus recording your cryptocurrency transactions is also recommended.
Although Bitcoin is one of the most popular cryptocurrencies in the market, it is quite volatile, and there are huge price fluctuations within a single day. With newer crypto users, there can be concerns regarding the legality of cryptocurrencies. People do not want to lose their money over illegal and fraudulent schemes. There have been cases where people have invested in fraudulent cryptocurrencies and lost all their money.
Investing in Bitcoin is quite similar to investing in an asset, and that is how tax agencies see it. Even though the cryptocurrency is virtual and decentralised, the government has found a way to keep it under some form of regulation. Some countries consider Bitcoin a threat to their financial ecosystem, whereas it is built to make it stronger and more efficient.
Since we already know that Bitcoin is legal in Australia, head over to Zipmex to buy or sell some bitcoins and see what other services are on offer.