Investing in cryptocurrencies in Australia — what you need to know?
The highs and lows of cryptocurrency trading have been headlining the news recently. The cryptocurrency global market capitalisation value peaked on January 8 this year at $US 830 billion then dropped to just above $US 270 billion on April 1. It has now returned back up to $US 380 billion (May 17), reaching mid March’s market value reveals Coin Market Cap charts.
We have all heard of Bitcoin, the most traded cryptocurrency globally, but an average day of digital currency exchange, you may see over 1500 different types of cryptocurrencies being traded. On May 17,1592 types of cryptocurrency coins were being traded in 10994 markets globally.
Already trading in cryptocurrencies or thinking about trading?
If you are already buying and selling cryptocurrencies or thinking about tackling the market, then knowing about Australian tax implications and the new government cryptocurrency regulations for traders, will guide you on your way.
What are cryptocurrencies?
The Australian Securities and Investment Commission (ASIC) reports that cryptocurrencies are also known as virtual currencies or digital currencies and are a form of electronic money. They don’t exist as coins or notes, but a cryptocurrency unit, such as a bitcoin, is a digital token created from a code, using an encrypted string of data blocks known as a blockchain.
Tax implications of cryptocurrency trading.
If you are trading in cryptocurrency in Australia ASIC advises on its Money Smart site that if your digital currency costs is less than $10,000 and you are only using it to pay for personal goods and services, it is not taxed. However, if you are using virtual currencies for other purposes, such as conducting a business, paying staff or for making a profit, you will be taxed.
The Australian Tax Office (ATO) refers to Bitcoin as a cryptocurrency example and it views Bitcoin as neither money nor Australian or foreign currency. It sees it as property and an asset for capital gains tax (CGT) purposes, as are other digital currencies, with the same characteristics as Bitcoin.
- If you hold digital currencies as an investment, you will pay capital gains tax on any profits made, when you sell them.
- The profits traded from virtual currencies will be part of your assessable income.
- When conducting a business, if you use cryptocurrencies to pay for or accept as payment for goods and services, GST is payable.
- If you are mining bitcoins or other digital currencies, all profits on sales will be part of your assessable income.
- When you are buying and selling cryptocurrencies as an exchange service, you will pay income tax on the profits and GST will apply on the transactions.
What are some issues when trading on Australian cryptocurrency exchanges?
One of the main issues that Trading exchange need improvement is to keep fees low so they do not cancel out any gains customers may have achieved. Aussies seem to pay premiums on everything and unfortunately, this has not excluded cryptocurrencies.
Another issue that can be done better is the accessibility to lesser known coins, “it is extremely difficult to access altcoins from popular projects such as IOTA, Cardano, Tron, and Stellar.”
Ausfinex plans to offer an Australian cryptocurrency exchange that supports customers’ needs and counteracts these issues. AUSFINEX is boasting to be Australia’s largest cryptocurrency exchange when it launches in 2019.
AUSTRAC’s mandatory registration requirements for all Australian digital currency exchange providers will certainly help improve the industry’s operations and help bring cryptocurrencies into the mainstream.
Australian regulations and obligations for digital currency exchange providers
AUSTRAC, the Australian Government’s financial intelligence agency has regulatory responsibility for anti-money laundering (AML) and counter-terrorism financing (CTF). It provides guidance on its website on AML and CTF for digital currency exchange (DCE) providers.
What are the new AML and CTF obligations for DCE providers?AUSTRAC requires a business which provides exchange services converting fiat currency (e.g. in Australian or US dollars) into digital currency and vice versa to:
- Enrol and register your business with AUSTRAC;
- Adopt and maintain an AML/ CTF program that reflects your business’ operations;
- Report suspicious matters and threshold transactions to AUSTRAC;
- Maintain records relating to your customer identification, transactions and your AML / CTF program.
As of April 3 this year, AUSTRAC is providing transitional arrangements to allow new and existing DCE businesses time to implement the new AML / CTF obligations:
Those DCE providers wanting to start providing DCE services from 15 May, registration with AUSTRAC is mandatory, before any trading commences. It will be better if DCEs get in early and register on AUSTRAC or update company details if already registered.
Australia is small but Australians are often early adopters in technology and many Australians don’t even carry cash in their wallets anymore. So, there’s a lot of potential for cryptocurrencies.
Cryptocurrency coin market chartshttps://coinmarketcap.com/charts/