Australia's controversial new guidelines for cryptocurrency taxation should be ignored as unclear and should probably be seen as "toilet paper", according to an Australian law firm.
On November 9, the Australian Taxation Office (ATO) published guidance that could affect how investors and traders involved in decentralized finance file their taxes.
In a Nov. 27 blog, Cadena Legal noted that the guidance was "non-binding" rather than a binding public ruling, arguing that such guidance should be viewed as "toilet paper."
If you hate the ATO's recent web guide to crypto, read this:https://t.co/JA5GYsDVFt
- Harry Dell taxpapi.eth (@harrydelltaxlaw) November 27, 2023
The law firm noted that there is a lot of confusion about what Australians can do with DeFi without triggering capital gains tax (CGT). The company's founder, Harrison Dell, later told Cointelegraph that the issue would be resolved with a public ruling:
“If the ATO issued a public ruling we could all rely on it, but instead we have this non-binding nonsense which confuses everyone more and will likely reduce voluntary tax compliance by the Australian crypto community.”
Dell, who previously worked at the ATO auditor between 2017 and 2019, said it is even telling its clients to ignore the rules for the time being:
“[It] is inciting panic in the Australian crypto community. "I'm actively telling people that they're better off ignoring it and following their own advice."
However, one crypto tax expert warned that ignoring the ATO guidelines could be risky, arguing that while they are not legally binding rules, an investor may still need to pay a lawyer to fight the ATO if they determine they are not meets your guidelines.
On November 21, Cointelegraph tried to find out through the ATO either transferring funds through a bridge or staking Ether (ETH) in a liquid staking protocol like Lido constituted a capital gains tax event. But the ATO did not give a direct answer.
However, Dell believes that the two chain activities are more likely to trigger a CGT event than not, based on the few private failures it has monitored:
“The ATO basically said that any token-to-token transaction is taxable and would likely include the transfer of a token from an L1 to an L2.”
"It is very difficult to say whether this is correct or not, as the ATO did not provide any useful reason in their web guide," Dell added.
Phew. I just did my personal tax returns on my crypto earnings.
It doesn't seem real until you see the number.
There is only one winner in this system and it is not us.
Well played, Australian Government. Well played.
-Ben Simpson (@bensimpsonau) November 17, 2023
Related: Australian Tax Data Shows Growing Desire to Hold Crypto for DIY Retirement
Dell suggested that the rules will remain unclear, at least until a public ruling is issued or the government proposes new legislation to fill the gaps left by the ATO.
"Actually, I suspect we'll all have to wait until someone strategically litigates these issues," Dell said. "Unfortunately, all of these solutions will take a long time."
Magazine: Best and Worst Countries for Crypto Taxes, Plus Crypto Tax Tips
Post navigation
