As we enter the final quarter of FY2023, taxpayers will be aware of requirements and planning for FY2024. For the first half of FY2023 the Australian Taxation Office (ATO) provided more updated guidance. In summary, they are:
- Gifts and donations of crypto assets: Give a gift or donation of a crypto-asset to a recipient of a gift amount (DGR) will be an allowable deduction as the ATO confirmed in the website guidance published on 25 July 2022. Existing rules for the valuation of gifts apply 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 tax point and therefore requires the taxpayer to determine and disclose any capital gain or loss.
- Wagering of rewards: In guidance published on 7 September 2022, the ATO recognized that these activities may apply to the wider “crypto-assets” rather than just “cryptocurrency”. The position remains that rewards received by counterfeiters are ordinary income and generally a capital gains tax event on disposal. The point at which a counterfeiter is considered to receive the rewards remains a complex issue due to access restrictions relevant to multiple platforms. The ATO has not given specific guidance on this point, but we must rather look at historical tax issues.
- Airdrops: In guidance published on 7 September 2022, the ATO distinguishes between Initial Allocation Airdrops and subsequent Airdrops. For taxpayers, the former is not a taxable event, but the latter will be considered ordinary income.
Still – updated website guidance on tax treatment of crypto assets
The ATO recently updated its “evolving advice” to signal that it will undertake targeted consultation on the ATO website’s guidance regarding the tax treatment of cryptoassets.
The ATO will consult a blockchain industry body, along with Treasury and the National Tax Liaison Group, with consultation expected to be completed in May. The updates are intended to give taxpayers greater certainty about how crypto assets will be treated for tax purposes.
Many taxpayers have been placed in difficult positions due to regularly changing, sometimes unclear and often absent website guidance on various tax and crypto issues. Considering the significant penalties that can apply where incorrect tax positions are taken and given the growing importance and trend of crypto, clarity and certainty from the ATO is welcome.
If you intend to rely on current ATO guidance, we recommend that you retain copies of such guidance. Although this guidance is not binding on the Commissioner, it may (where supported by further analysis and evidence) help to reduce the penalty on an audit if an alternative tax treatment is used. Taxpayers should seek legal advice in relation to complex holdings, uncertain circumstances or where more than one conclusion can be reached to manage risks associated with ATO scrutiny.
