Legal Tender

Wallet with selection of banknotes inside.

Australian banknotes are a legal tender throughout Australia (this is provided in section 36(1) of the Reserve Bank Act 1959).

A payment of coins is a legal tender throughout Australia if it is made in Australian coins, but this is subject to some restrictions about how much can be paid in coin. According to the Currency Act 1965 (section 16) coins are legal tender for payment of amounts which are limited as follows:

  • not exceeding 20c if 1c and/or 2c coins are offered (these coins have been withdrawn from circulation, but are still legal tender);
  • not exceeding $5 if any combination of 5c, 10c, 20c and 50c coins are offered; and
  • not exceeding 10 times the face value of the coin if $1 or $2 coins are offered.

For example, if someone wants to pay a merchant with five cent coins, they can only pay up to $5 worth of five cent coins and any more than that will not be considered legal tender.

The Reserve Bank of Australia does not have legal responsibility for Australian coins. That responsibility belongs to the Royal Australian Mint.

Transactions In Australian Currency

Every sale, transaction or dealing relating to money, or involving the payment of, or a liability to pay, money in Australia is to be done in Australian currency unless it is done, or the parties to the sale, transaction or dealing agree that it will be done, in the currency of another country.

However although transactions are to be in Australian currency unless otherwise agreed or specified, and Australian currency has legal tender status, Australian banknotes and coins do not necessarily have to be used in transactions and refusal to accept payment in legal tender banknotes and coins is not unlawful.

Commercial Terms

Stack of banknotes with the $5 banknote on top.

It appears that a provider of goods or services is at liberty to set the commercial terms upon which payment will take place before the ‘contract’ for supply of the goods or services is entered into. For example, some vending machines, parking meters and road toll collection points indicate by signs that they will not accept low denomination coins. Some road toll collection points indicate that they will not accept any cash at all. If a provider of goods or services specifies other means of payment prior to the contract, then there is usually no obligation for legal tender to be accepted as payment.

However, refusal to accept legal tender in payment of an existing debt, where no other means of payment/settlement has been specified in advance, conceivably could have consequences in legal proceedings; for example, the creditor may be unable to enforce payment in any other form.

These general comments about legal tender are offered only as a guide and should not be taken as legal advice. People who need clarification on these matters should obtain appropriate legal advice.