Australia isn’t the first country that comes to mind when thinking about cryptocurrencies. However, the cryptocurrency market is large for the region. Consequently, not too long ago, the government adopted a cryptocurrency regulation.
There aren’t too many countries in the world that have a national level cryptocurrency regulation to speak of. In most cases, they have a small rag-tag group of laws that apply to cryptos, which isn’t really a regulation when you think about it. Furthermore, you can usually find it in countries where cryptos play a large role in the local economy.
Places like China, Japan, and South Korea can be expected to have it, but for a country like Australia, it was quite unexpected.
The government did justify it as a war against money laundering and illegal transactions, but in the grand scheme of things, it was installed to enforce a national level taxation policy on crypto capital gains.
But the Aussies are quite sly with their methods of avoiding unnecessary taxes, and cryptos have proven to be a good tool for it.
What is Cryptocurrency Regulation?
The thing about cryptocurrencies is that the government cannot track them directly. That is, unless local cryptocurrency exchanges provide information about customer transaction histories. By watching the patterns on a user’s wallet and his or her transaction history, the government can easily determine what type of gain that individual made with cryptocurrency in a single month or year. Therefore, they can collect the tax without issue.
However, the whole regulation hinges on the cooperation of the cryptocurrency exchanges, which is not stable. You see, the local exchanges may comply, but all the foreign companies do not have that type of obligation. That’s why it’s common to see Aussies on platforms such as Binance or OKEx.
And that’s how most Australians played it. They left the local cryptocurrency exchanges and moved to foreign companies. As long as they kept their funds over there and found alternate methods of cashing them out, avoiding unnecessary taxes would be a piece of cake. And they pulled it off.
How they did it
The Aussies managed to combine their two favourite things together and come up with a plan never seen before. They managed to use the country’s Interactive Gaming Act of 2001 against them. According to the act, no Australian company is able to provide services to the local population. Only foreign companies can do that. Those very same foreign companies would be the sources of liquidating their crypto assets.
At that time, online casino games in Australia were all the rage, and most of them supported bitcoin payments. This meant that the only thing Aussie crypto investors had to do is, transfer their cryptos from their cold wallet to the website’s hot wallet, convert it into fiat currencies, and then simply request withdrawals with a few spins here and there.
But they also added another filter. They cashed out the funds on third-party payment providers like Skrill, PayPal or Neteller. And finally, after that, they transferred it to their bank accounts, one minimum untaxable transaction at a time.
It was a gruesome process. But overall, it turned out to be the most effective way of avoiding unnecessary taxes in the process.
Isn’t that illegal?
Technically, it was actually illegal. However, the new regulations so new that the enforcement wasn’t quite there yet. In a way, you could say that the Australian government, although aware of the process, allowed this to unfold.
Furthermore, it’s not like the Aussies using these tactics were damaging the economy. Instead of paying their capital gain on taxes, they would simply pay themselves. This would in turn increase the overall purchasing power of the consumers in Australia. It was still somewhat of a win-win situation for the government and the country.
The only loss would have been if those crypto traders returned those funds into cryptocurrency. But they rarely did that. Instead, they always liquidated a small percentage of their portfolios.
Overall, Aussies managed to display an interesting case of ingenuity and cunning. Not only did they avoid extra taxes on cryptos, but in the end still managed to benefit their local economy.