How are NFTs (Non-Fungible Tokens) treated under Australian law?

Intellectual Property vs. Token Ownership

The most common legal misconception is that buying an NFT gives you ownership of the underlying art or image. In Australia:

• Copyright remains with the creator: Unless there is a specific written agreement (embedded in the smart contract or a side contract) assigning copyright, the buyer only owns the token and a license to display it.¹
• Enforceability: The “Terms of Service” of the marketplace (like OpenSea or Rarible) often define the extent of these rights.

When is an NFT a “Financial Product”?

ASIC (The Australian Securities and Investments Commission) is increasingly scrutinizing NFTs that offer more than just “collectibility.” An NFT might be regulated as a Managed Investment Scheme or a Derivative if:²

1. It promises a share of future profits or royalties from a project.
2. It awards “staking” rewards in exchange for holding the token.
3. It functions as a “fractional” investment in a physical asset (like real estate).

Launching such a project in Australia without the proper financial services licensing (AFSL) can lead to significant civil and criminal penalties.

Taxation of NFTs

The ATO treats NFTs similarly to other cryptocurrencies.

• Capital Gains Tax (CGT): Selling an NFT for a profit triggers a CGT event.
• GST: If you are “in business” as an NFT creator or trader, you may have GST obligations on your sales, particularly if you are selling to Australian residents.³

Launching an NFT project or need a ‘utility’ review? Contact Bell & Senior for a technical legal audit of your smart contract and terms of service.