Tuesday, 28 November 2023
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Australia to impose capital gains tax on wrapped cryptocurrency tokens

Australia to impose capital gains tax on wrapped cryptocurrency tokens

The Australian Taxation Office (ATO) has issued guidance on capital gains tax (CGT) treatment of decentralized finance (DeFi) and wrapping crypto tokens for individuals, clarifying its intent to continue taxing Australians on capital gains when wrapping and unwrapping tokens.

In May 2022, the ATO outlined crypto capital gains as one of four key focus areas. Building on the initiative, the Australian taxman recently clarified a raft of actions considered taxable in its jurisdiction. The transfer of crypto assets to an address that the sender does not control or that already holds a balance will be regarded as a taxable CGT event, the ATO said in its statement.

“The capital proceeds for the CGT event are equal to the market value of the property you receive in return for transferring the crypto asset,” the ATO added. However, the CGT event will trigger depending on whether the individual recorded a capital gain or loss. A similar approach has been considered for taxing liquidity pool users and providers, and DeFi interest and rewards.

In addition, wrapping and unwrapping tokens will also be subject to triggering a CGT event. The ATO stated:

“When you wrap or unwrap a crypto asset, you exchange one crypto asset for another and a CGT event happens.”

The above statement clarifies that wrapping or unwrapping tokens — irrespective of their price at the time — will be subject to capital gains tax.

Chloe White, the managing director of Genesis Block, who is also an advisor to Blockchain Australia, claimed that ATO is in breach of the technology neutrality principle, which ultimately impacts the financial future of young Australians.

Related: Australian regulators will compel businesses to report cyberattacks: Report

Adding to the pressures on Australians, local crypto exchange CoinSpot reportedly got hacked for $2.4 million in a “probable private key compromise” over at least one of its hot wallets.

As previously reported by Cointelegraph, Etherscan shows a transaction totaling 1,262 Ether (ETH) — worth $2.4 million — was moved from from a known CoinSpot wallet to the alleged hacker’s wallet.

The presumed attacker stole 1,262 ETH from a known CoinSpot wallet. Source: ZachXBT

Subsequent investigations found the stolen ETH was being swapped for Bitcoin (BTC) via THORChain and spread out across different wallet addresses.

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