Australia’s controversial new guidelines for cryptocurrency taxation should be ignored for being unclear and should probably be seen as “toilet paper,” according to an Australian law firm.
On Nov. 9, the Australian Tax Office (ATO) released guidance that could impact how investors and traders involved in decentralized finance report their taxes.
In a Nov. 27 blog, Cadena Legal noted the guidance was “non-binding” instead of a binding public ruling — arguing that such guidance should be seen as “toilet paper.”
If you hate the ATO’s recent web guidance on crypto, read this:https://t.co/JA5GYsDVFt
— Harry Dell taxpapi.eth (@harrydelltaxlaw) November 27, 2023
The law firm noted there is a lot of confusion about what Australians can do with DeFi without triggering a capital gains tax (CGT). The firm’s founder, Harrison Dell, later remarked to Cointelegraph that the issue would be resolved with a public ruling:
“If the ATO released a public ruling, we could all rely on that, but instead we have this non-binding nonsense which makes everyone more confused and will probably reduce willing tax compliance by the Australian crypto community.”
Dell, who previously worked at the ATO auditor between 2017-2019, said he’s even telling his clients to ignore the rules for the time being:
“[It] is inciting panic in the Australian crypto community. I am actively telling people they are best ignoring it and get their own advice.”
One crypto tax pundit, however, warned that ignoring ATO guidelines could be risky, arguing that while they aren’t legally binding rules, an investor may still need to pay a lawyer to fight the ATO should they determine it falls foul of their guidance.
On Nov. 21, Cointelegraph attempted to find out from the ATO whether transferring funds via a bridge or staking Ether (ETH) on a liquid staking protocol such as Lido constituted a capital gains tax event. But the ATO didn’t give a direct answer.
However, Dell believes the two on-chain activities are more likely to trigger a CGT event than not, based on the few private rulings that he’s overseen:
“The ATO essentially said any token-to-token transaction is taxable and would likely include transferring a token from an L1 to an L2.”
“Whether this is correct or not is very difficult to say, as the ATO did not provide any useful reasons in their web guidance,” Dell added.
Ooof. Just did my Personal Tax Returns from my Crypto Profits.
Doesn’t feel real until you see the number.
There’s only one winner in this system and it’s not us.
Well played Australian Government.. Well played.
— Ben Simpson (@bensimpsonau) November 17, 2023
Related: Australian tax data shows a growing desire to hold crypto for DIY retirement
Dell suggested the rules will remain unclear, at least until a public ruling is made or the government proposes new legislation to fill the gaps left by the ATO.
“In reality, I suspect we will all have to wait until someone strategically litigates these matters,” Dell said. “All of these solutions will take a long time unfortunately.”
Magazine: Best and worst countries for crypto taxes — plus crypto tax tips
