As we progress into the final quarter of FY2023 tax compliance requirements and planning for FY2024 will be front of mind for taxpayers. For the first half of FY2023 the Australian Taxation Office (ATO) provided several pieces of updated guidance. In summary they are:
- Gifts and donations of crypto assets: Gifting or donating a crypto asset to a deductible gift recipient (DGR) will be an allowable deduction the ATO confirmed in website guidance published on 25 July 2022. Existing rules on valuing gifts applies to crypto assets.
- Crypto to crypto exchange or swap: The ATO confirmed on 19 August 2022 that the transfer of a crypto asset from one exchange to another is a disposal of a CGT asset. This is a taxing point and therefore requires the taxpayer to determine and disclose any capital gain or loss.
- Staking rewards: In guidance published on 7 September 2022 the ATO recognised that these activities can apply to the broader ‘crypto assets’ rather than ‘cryptocurrency’ only. The position remains that rewards received by forgers are ordinary income and generally a capital gains tax event on disposal. The point in time when a forger is deemed to receive the rewards remains a complex issue due to access restrictions relevant to several platforms. The ATO has not provided specific guidance on this point but rather we must look to historical tax issues.
- Airdrops: In guidance published on 7 September 2022 the ATO distinguishes between Initial Allocation Airdrops and subsequent Airdrops. Importantly for taxpayers the former is not a taxable event but the latter will be deemed to be ordinary income.
Still to come – updated website guidance on the tax treatment of crypto assets
The ATO recently updated its ‘advice under development’ to signal that it will be undertaking targeted consultation on ATO website guidance regarding the tax treatment of crypto assets.
The ATO will consult a blockchain industry body, along with Treasury and the National Tax Liaison Group, with consultation expected to complete in May. The updates are intended to provide taxpayers with greater certainty as to how crypto assets will be treated for tax purposes.
Many taxpayers have been placed in difficult positions due to the regularly changing, sometimes unclear and often absent website guidance on various tax and crypto issues. Considering the substantial penalties that may apply where incorrect tax positions are taken and given the growing significance and trend with crypto, clarity and certainty from the ATO is welcomed.
If you intend to rely on current ATO guidance, we recommend keeping copies of such guidance. Whilst this guidance is not binding on the Commissioner, it may (where supported by further analysis and evidence) assist to reduce penalties upon an audit if an alternative tax treatment is applied. Taxpayers should seek legal advice in relation to complex holdings, uncertain circumstances or where more than one conclusion can be reached in order to manage risks associated with ATO scrutiny.
If you have questions about your tax position, please contact our Tax & Structuring team.
This article was written by Sophie Barber (Lawyer), Laura Spencer (Senior Associate), and Harry Giannakidis (Principal Solicitor).
This article is part of the Blockchain Byte series by KHQ’s Tax & Structuring team. The series provides ‘byte-sized’ articles outlining key tax and structuring associated crypto assets as well as updates in the Blockchain space which regularly occur. To register for the latest byte and other tax and structuring news, click here to subscribe.
