Taxing Non-resident Holders of Tokens Relating to Australian Land

Despite the rising interest in the tokenisation of rights to land, the tax systems of many jurisdictions have not addressed this issue to a large extent. This article considers the Australian tax treatment of land tokens and, in particular, "real estate tokens", which generate an income stream, and "mining tokens", which provide a promise of the future supply of resources. The article first establishes that land tokens referable to Australian land, issued by private enterprises, do not provide proprietary rights to Australian land. After examining the commercial features of land tokens, the article shows that potential income tax challenges would likely arise as a result of the scope of Australia's capital gains tax regime, which currently applies to non-residents in relation to dealings with taxable Australian property. The history and development of the non-resident capital gains tax regime in Australia shows, in the absence of common law source rules, three main policy rationales underlying the current legislative design: alignment with international tax practice, administrative simplicity and consideration for foreign investment. However, this article finds that none of these tax policy rationales provide convincing grounds for capital gains derived by non-residents with respect to their Australian land token dealings being excluded from taxation. The Australian Government may operate on the basis that land tokens are dealt with on a portfolio basis (less than 10% of the value of the total token asset per investor), which makes the legislative inclusion of land tokens within the capital gains tax regime unnecessary. However, the question of whether to tax capital gains derived by non-residents upon disposal of Australian land tokens ultimately remains a matter of policy for the government to decide as the existing policy bases neither support nor exclude such taxation.