The ATO has made significant updates to its guidance on cryptocurrency taxation, representing a departure from the traditional approach of issuing binding public rulings on controversial or complex tax matters.
Harrison Dale, tax lawyer, founder of Cadena Legal and former auditor and in-house tax adviser to the ATO, criticized this approach, saying: "This is the first time I've tried to publish the ATO's complex legal opinion on a website and not. On a main website. . .. public space.”
He noted that the ATO website is used to explain how the tax system generally works, but in this case presented complex views without a solid legal basis. Dell is concerned about the ATO's decision to offer non-binding advice on a website without adequate legal backing, with tax professionals and cryptocurrency users seeking clarity.
Tax News on Decentralized Finance (DeFi).
One of the biggest and most controversial updates released by the ATO concerns transactions on decentralized finance (DeFi) platforms. These platforms allow cryptocurrency users to perform various peer-to-peer financial activities such as lending, borrowing and even earning interest on their cryptocurrency. The problem with DeFi platforms is that there are no intermediaries; Everything is done using smart contracts, which guarantee safe and reliable interactions with other people, even with large sums of money.
In its latest update, the ATO said most DeFi transactions trigger CGT events, including token trading, fundraising and cryptocurrency lending.
"It's very important," Dale said. "It also came out and said, 'Every time you swap one token for another, it triggers a tax.'
Dale highlights these challenges by highlighting the lack of specific advice from the ATO and the need for taxpayers to seek expensive professional advice. Dale added that few tax and accounting professionals have the expertise to audit smart contracts and provide sound advice, a gap the ATO cannot fill on its own.
Spending with crypto cards
The ATO has also clarified the tax implications of using cryptocurrency to top up gift cards or debit cards.
“The position of the ATO (on this issue) is not surprising; "Selling or transferring cryptocurrency to receive a gift card is clearly a disposable event," says Dell This is consistent with the widespread perception that such transactions involve selling cryptocurrency for cash with capital gains tax (CGT).
Tax Consequences of Crypto Gambling
The ATO has also updated its guidance on the tax treatment of crypto gaming profits. Dale explained: “It has also recently been clarified that cryptocurrency games have some taxable elements, such as betting opportunities, but winnings are generally tax-free, as are most crypto games. cash “I play in Australia. » I bet I want it. While the use of cryptocurrencies is taxable, gains are largely tax-free
Crypto assets for personal use
In a recent update, the ATO also looked at the difference between cryptoassets intended for personal use and those intended for investment.
Dale has criticized the ATO's guidance in this area, saying it contains "numerous abuses". He argues that the underlying question should be the reason for holding cryptocurrencies or NFTs, which he says goes beyond the ATO's educational guidance and instead raises a legitimate claim for a personal use exemption.