Australia’s confusing new crypto tax guidance is ‘toilet paper’, says law firm

Australia's controversial new cryptocurrency tax directive should be ignored because it's unclear and should probably be treated as “toilet paper”, according to one Australian law firm.

On November 9, the Australian Taxation Office (ATO) issued guidance that could affect how investors and traders involved in decentralized finance report their taxes.

In a blog post on November 27, Cadena Legal described the directive as “non-binding” rather than a binding public decision – arguing that such a directive should be seen as “toilet paper”.

If you hate the recent ATO web guide on crypto, read this: https://t.co/JA5GYsDVFt

— Harry Dell taxpapi.eth (@harrydelltaxlaw) November 27, 2023

The law firm says there is a lot of confusion about what Australians can do with DeFi without incurring capital gains tax (CGT). The company's founder, Harrison Dell, later told Cointelegraph that the issue would be resolved through a public resolution:

“We could all rely on that if the ATO released a public ruling, but instead we have this non-binding nonsense that will further confuse everyone and possibly reduce voluntary tax compliance in the Australian crypto community.”

Dell, which previously served as an ATO auditor between 2017-2019, is telling customers to ignore the rules for the time being:

“[It] It's causing panic in the Australian crypto community. I'm telling people it's best to ignore it and get their own advice.

A crypto tax expert, however, warned that ignoring the ATO's guidelines could be dangerous, as even though they are not legally binding rules, an investor may still need to pay a lawyer if they prove the ATO wrong about their guidance.

In the year On November 21, Cointelegraph sought to find out from the ATO whether transferring funds via a bridge or Ether (ETH) on a liquid staking protocol like Lido is a capital gains tax event. But the ATO didn't give a straight answer.

However, Dell believes that the two moves across the chain are more likely to trigger a CGT event, based on the few individual decisions it oversees.

“ATO is basically any token-to-token transaction that is taxable and probably involves the transfer of a token from L1 to L2.”

“It is very difficult to say whether this is correct or not, because the ATO has not provided any relevant reasons in their web guidance,” added Dale.

Of. My personal tax refund from crypto profits.

It doesn't seem real until you see the numbers.

There is only one winner in this system and it is not us.

Well played Australian government.. well played.

— Ben Simpson (@bensimpsonau) November 17,

Related: Australian tax data shows growing interest in crypto for DIY retirement

Dale pointed out that the rules are unclear, at least until a public decision is made or the government proposes new legislation to fill gaps identified by the ATO.

“Honestly, I guess we're all going to have to wait until somebody makes these issues in a strategic debate,” Dale said. “All these solutions unfortunately take a long time.”

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