Australia’s tax regulator, the Australian Taxation Office (ATO), has issued new guidance on the taxation of decentralized finance (DeFi) transactions. However, the guidance has left DeFi users confused and uncertain about their tax obligations. The ATO has failed to provide clear answers to questions regarding specific transactions, such as staking Ether on Lido or transferring funds via bridges to layer 2 networks. The guidance states that capital gains tax (CGT) is payable when transferring tokens to another address or smart contract that a person doesn’t have “beneficial ownership” over, or if the address has a non-zero balance of the tokens. Examples of DeFi activities that may incur a CGT event include exchanging one crypto asset for an equivalent number of the same asset in the future, providing liquidity to a protocol, wrapping tokens, and loaning assets. However, it is unclear whether liquid staking or sending tokens through a layer 2 bridge fall under these criteria. The ATO spokesperson has stated that the tax consequences of a transaction depend on the steps taken on the platform or contract and the relevant facts and circumstances of the taxpayer. This lack of clarity has left investors unable to comply with the potentially unintended consequences of the new guidance. A CGT event would require DeFi users to pay tax on the “profit” made from a transaction, even if they haven’t sold the assets or realized a profit. The delay in releasing appropriate rules for taxing cryptocurrency by the Board of Taxation has allowed the ATO to create its own rules, leading to complexity and uncertainty for Australian crypto users. Experts have differing opinions on whether certain transactions, such as transfers via bridges or liquid staking, result in a CGT event. Some argue that a change in beneficial ownership is necessary for a CGT event to occur, while others believe that the ATO’s understanding of DeFi is limited and the new rules are too aggressive. The lack of economic substance in the rules regarding wrapped tokens is also a point of contention. Overall, the lack of clarity and understanding of DeFi transactions by the ATO has created confusion and uncertainty for Australian crypto users.
This News Article was automatically generated by Bob the Bot (AI)
This News Article was automatically generated by Bob the Bot (AI)
| Information | Details |
|---|---|
| Geography | Australia |
| Countries | 🇦🇺 |
| Sentiment | negative |
| Relevance Score | 1 |
| People | Andrew Bragg, Danny Talwar, Jesse Coghlan, Matt Walrath |
| Companies | Cointelegraph, Labor government, Crypto Tax Made Easy, Koinly, Australian Taxation Office (ATO), Liberal Party, Board of Taxation |
| Currencies | Ethereum |
| Securities | None |
