Australia’s New Cryptocurrency Taxation Guidelines Dismissed as “Toilet Paper” by Law Firm
An Australian law firm has advised cryptocurrency investors and traders to ignore the country’s new guidelines for cryptocurrency taxation, referring to them as “toilet paper.” The Australian Tax Office (ATO) released non-binding guidance on Nov. 9 that could impact how decentralized finance participants report their taxes. The law firm, Cadena Legal, argued that the unclear and non-binding nature of the guidance only serves to confuse taxpayers and reduce tax compliance. Former ATO auditor Harry Dell also recommended ignoring the rules and seeking individual advice. However, some experts caution that disregarding ATO guidelines could be risky and may lead to legal battles with the tax office.
Token-to-Token Transactions Likely to Trigger CGT Event, Says Expert
Harry Dell, based on his experience overseeing private rulings, believes that token-to-token transactions are more likely to trigger a capital gains tax (CGT) event than not. He pointed out that the ATO’s web guidance suggests that any token-to-token transaction is taxable, including transfers between Layer 1 and Layer 2 networks. However, Dell criticized the lack of useful reasons provided by the ATO in their web guidance, making it difficult to determine whether this interpretation is correct.
Uncertainty Remains Until Public Ruling or New Legislation
Dell anticipates that the confusion surrounding cryptocurrency taxation will persist until a public ruling is issued or new legislation is proposed to address the gaps left by the ATO. He believes that strategic litigation will likely be necessary to resolve these matters, but acknowledges that all of these solutions will take a significant amount of time.
Hot Take: Australia’s Cryptocurrency Taxation Guidelines Raise Concerns
The Australian Tax Office’s non-binding guidance on cryptocurrency taxation has been met with criticism and confusion. While some experts advise ignoring the guidelines due to their lack of clarity, others caution that disregarding them could lead to legal battles with the tax office. The interpretation of token-to-token transactions as taxable events has sparked debate, with critics calling for more comprehensive explanations from the ATO. Overall, the uncertainty surrounding cryptocurrency taxation in Australia highlights the need for clearer guidelines and potential legislative changes to address these issues effectively.
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