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October 30, 2023

Is Crypto Mining Illegal in Australia? It’s Legal and Here’s Why

Is Crypto Mining Illegal in Australia
Katya Richardson

Written by Katya Richardson

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Cryptocurrency mining has taken the financial world by storm, and Australia is no exception. This article delves into how Australia deals with the cryptocurrency world, financial rules, and taxes, offering a look into its unique approach. Australia, known for its stunning landscapes and diverse wildlife, has become a key player in the cryptocurrency scene.

The country is navigating a path that balances innovation and regulation. From the government, Australia’s rules and tax policies on cryptocurrency mining are getting a lot of attention. The country aims to encourage innovation while ensuring financial stability, making it interesting in global cryptocurrency regulation.

Whether you’re a crypto enthusiast, a financial expert, or just curious about the future of digital money, this article offers valuable insights into Australia’s role in the world of cryptocurrencies.

General Laws of Australia’s Stance of Cryptocurrencies

Navigating crypto mining taxes and regulations can prove challenging, especially for newcomers to the crypto sphere. Let’s delve into the financial regulations and tax responsibilities to assist you in aligning with government laws.

Financial Regulations

There are a range of laws in Australia that regulate crypto-related activities. Here is the list of financial supervision authorities’ roles in crypto:

  1. ASIC (Australian Securities and Investments Commission)
    • Regulating Financial Activities: ASIC oversees financial services and products in Australia, including those related to cryptocurrencies. If a crypto mining operation offers financial services to investors, ASIC is responsible for regulating them.
    • Protecting Consumers: ASIC is in charge of safeguarding consumers from dishonest practices in finance, including the crypto industry. If a mining operation engages in deceitful activities or fails to follow the rules, ASIC can take legal action.
    • Monitoring Investments: Cryptocurrency mining businesses that offer investment opportunities must follow ASIC’s regulations, which may include obtaining licenses and adhering to guidelines.
    • Preventing Financial Crimes: ASIC ensures that cryptocurrency exchanges and mining businesses follow Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) laws. This involves verifying customer identities and reporting suspicious transactions.
  2. AUSTRAC (Australian Transaction Reports and Analysis Centre)
    • Monitoring Financial Crimes: AUSTRAC is responsible for overseeing and regulating compliance with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) rules in Australia. This applies to various sectors, including cryptocurrency if it offers services to customers.
  3. ATO (Australian Taxation Office)
    • Tax Oversight: The ATO is in charge of ensuring tax compliance for cryptocurrency transactions, including mining. Miners must report their crypto earnings, and depending on various factors, they might have to pay capital gains tax (CGT) or income tax.
  4. Industry Self-Regulatory Organizations:
    • Promoting Best Practices: Some crypto mining operations choose to be part of industry self-regulatory groups. These organizations establish guidelines and standards to encourage transparency and responsible practices within the crypto-mining sector.

Financial Regulations

In the realm of cryptocurrency, it’s essential to acknowledge your tax obligations. Cryptocurrency is divided into two categories, income tax (applies when you receive your mining rewards) and capital gains tax (applies when you dispose of your mining rewards). The Australian Taxation Office (ATO) considers all of these events as taxable.

The amount of tax you’ll pay on your cryptocurrency income is determined by your earnings throughout the current tax year. Here is a breakdown based on the income level:

Australia Resident Tax Rates 2023-2024

Income ThresholdsRateTax Payable on This Income
0 – $18,2000%Nil
$18,201 – $45,00019%19 cents for each $1 over $18,200
$45,001 – $120,00032.5%$5,092 plus 32.5 cents for each $1 over $45,000
$120,001 – $180,00037%$29,467 plus 37 cents for each $1 over $120,000
$18,001 – and over45%$51,667 plus 45 cents for each $1 over $180,000

You will be required to pay taxes at these rates on all of your regular income and any cryptocurrency sales made while holding a coin for less than a year. A 50% discount is available on income from the sale of cryptocurrency that has been held for more than 12 months. Therefore, only half of your capital gain will be taxed.

Information You Need To Records for Crypto Taxes

In Australia, not every cryptocurrency transaction attracts taxation. Here are a few instances of cryptocurrency transactions that are exempt from tax:

  • Holding cryptocurrency.
  • Transferring cryptocurrency between wallets you own.
  • Receiving a cryptocurrency gift.

When do I need to pay capital gains tax on mining earnings?

Capital gains or capital losses are triggered when a disposal event takes place. Disposal events encompass actions such as exchanging your cryptocurrency for Australian dollars, swapping your cryptocurrency for other digital assets, or using it to obtain goods and services. The amount of your capital gain or loss will depend on the fluctuations in the value of your cryptocurrency since its initial receipt.

Do mining earnings face double taxation?

When you sell, trade, or otherwise liquidate your mined cryptocurrency, you’ll experience capital gains or losses, just as you would in any situation involving the sale or disposal of your crypto assets. It’s important to note, that you won’t be subject to double taxation on the same income.

Is Mining Income Taxed Twice

Mining rewards are treated as ordinary income, and their taxable value is determined based on their fair market value at the time of receipt. Any income derived from mining a specific coin serves as the cost basis for that coin going forward. In the event of future disposal, you will only be liable for capital gains or losses based on the price fluctuations of your coins compared to their cost basis.

Conclusion

Cryptocurrency mining is legal and favoured in Australia due to its lower energy costs and the government’s relaxed stance on cryptocurrencies. The country recognizes cryptocurrencies as legitimate assets and has clear financial rules, including anti-money laundering and tax exemptions.

It’s important to note that taxes are a crucial aspect. If you’re involved in the cryptocurrency world, you must follow tax rules, like capital gains and income tax. Failing to report can lead to penalties.

Australia keeps an eye on this ever-changing field, adjusting regulations as needed. Whether you’re mining or investing in cryptocurrencies, staying informed and getting professional advice is key in this dynamic landscape.

Now that you’re familiar with the legal landscape, ensure you’re equipped with all the information by reading Is It Worth Mining Crypto in Australia?

The information presented on this website is general information only. It should not be taken as constituting professional advice from the website owner – NGS Crypto PTY LTD (NGS Crypto). Any information regarding past performance and returns contained on this website should not be construed or interpreted as a prediction or opinion as to future performance and returns. NGS Crypto is not a financial adviser. All views and observations expressed by NGS Crypto on this website are for information purposes only, are general in nature and should not be treated as investment or financial advice of any kind.