A green light for the reform and transformation of Australia’s Payments System
Overview
On 8 December 2021, Treasurer Josh Frydenberg announced a digital economy roadmap (Roadmap), which applies to payments and crypto assets. The Roadmap addresses regulation in connection with alternative digital (including private) currencies and emerging payment methods, and to establish new licensing and compliance procedures. The Roadmap addressed 3 separate reports, being:
the Australian Government report on Payments System Review;
the Senate Committee report on Australia as a Technology and Financial Centre; and
the Parliamentary Joint Committee Corporations and Financial Services report on Mobile Payment and Digital Wallet Financial Services.
Between the 3 reports, there were a total of 41 recommendations.
In summary and in relation to crypto and payments, the Government aims to have the following in place by mid-2022:
A thorough and sustainable plan for the payments system, developed with industry and reviewed annually.
Particulars of additional powers relating to the Treasurer to set payment system policy.
An understanding of how to modernise the payments system legislation to accommodate new and emerging payment systems, including consideration of Buy Now Pay Later (BNPL) and digital wallets.
For the trading of crypto assets, a completed consultation on the establishment of a licencing framework for digital currency exchanges.
Finalised consultation on a custody or depository regime for businesses that hold crypto assets on behalf of consumers.
Advice from the Council of Financial Regulators, working with other relevant agencies, on the underlying causes and policy responses to the issue of de-banking.
The Treasurer described the scope of the Roadmap as assessing the "adequacy of our current regulatory frameworks in light of rapid technological change and consumer preferences”. The Treasurer noted that there are still several regulatory gaps, and the reform associated with this Roadmap is needed to ensure policy objectives can continue to be met in a digital environment.
Government Response
The Response addresses each of the 41 recommendations. However, the responses do not directly address the tax aspects per se. The Government notes that it is expecting to receive a report from the Board of Taxation by the end of 2022 on an "appropriate framework for the taxation of digital transactions and assets". The Board of Taxation have not yet (at the time of writing) addressed this report in any way on their website.
Response to the Review of Australian Payments System
Of the 15 recommendations, the Government has agreed to 14. The Government did not agree to recommendation 5, being the establishment of a payments industry conveyor. Although the Government supports the objectives of this recommendation, it notes that with an enhanced Treasury function and deeper payments expertise (from Recommendation 4), the need for a convenor to act on Treasury’s behalf is nullified. Rather, Treasury will engage industry experts as required to assist the Treasurer in achieving the Government’s objectives detailed in the strategic plan.
Response to the Senate Committee Australia as a Financial and Technology Centre Final Report
Of the 12 recommendations, the Government agrees to, notes, or agrees in principle to 11. The Government did not agree to recommendation 7, being a renewable tax discount. The Government rebutted this recommendation, noting that they are focused on establishing a fit-for-purpose regulatory framework that encourages innovation, investment, jobs and provides appropriate protections and confidence for consumers to participate in these technologies.
It is worth noting that of the recommendations the Government noted or agreed in principle to, Treasury will be working with or briefing relevant entities (such as the ATO, ASIC and the RBA) to consider, research, and develop new appropriate policy going forward.
Response to the Parliamentary Joint Committee Corporations and Financial Services report: Mobile Payment and Digital Wallet Financial Services
Similarly, the Government has also largely agreed to all recommendations in this report and where the Government is hesitant, they intend to brief the relevant entities such as the ATO, ASIC, and the RBA to further any current policy and develop new policy where required.
Our team is well-versed in this complex area of law and will be following the developments – if you have any queries regarding how this transformation may impact you, please don’t hesitate to contact:
Paul Gray
Principal
T: 03 5225 5231 | M: 0414 195 886
E: pgray@ha.legal
Hugo Le Clerc
Lawyer
T: 03 5225 5213
E: hleclerc@ha.legal
Ryan Popovski
Lawyer
T: 03 5226 8572
E: rpopovski@ha.legal
