LEGAL TENDER

The Concise Oxford Dictionary defines legal tender as “currency that cannot legally be refused in payment of debt (usually up to a limited amount for baser coins, etc.)”.

It is the Bank’s understanding that, although Australian currency has legal tender status, it does not necessarily have to be used in transactions and that refusal to accept payment in legal tender notes and coins is not unlawful. This is the case even where an existing debt is involved. However, a 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, i.e. the creditor may be unable to enforce payment in any other form.

It appears that the provider of goods or services is at liberty to set the commercial terms upon which payment will take place before the “contract” is entered into. For example, some toll collection points indicate by signs that they will not accept low denomination coins. 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.

According to the Reserve Bank Act 1959, Australian notes are legal tender. According to the Currency Act 1965, coins are legal tender for payment of amounts which are limited as follows:

• not exceeding 20c if 1c and/or 2c coins are offered (however, it should be noted that these coins have been withdrawn from circulation but are still legal tender);
• not exceeding $5 if any of 5c, 10c, 20c and 50c coins are offered;
• not exceeding 10 times the face value if coins in the range 50c to $10 inclusive are offered; and
• to any value if coins of value greater than $10 are offered.

These general comments are offered only as a guide and should not be taken as legal advice. If further clarification is required, you should obtain legal advice.