Australia has confusing new cryptocurrency tax guidelines

Taxing cryptocurrencies remains a complex and often controversial topic. Recently, Australia introduced a new guide to cryptocurrency taxation. Not surprisingly, they have sparked a heated debate among experts and stakeholders in the field.

Australian Taxation Office’s Position on Cryptocurrency Taxation

On 9 November, the Australian Taxation Office (ATO) issued guidance that could have a significant impact on how investors and traders involved in DeFi file their taxes. This move by ATO marks a key step in addressing the tax implications of fast-growing DeFi activity. However, the clarity and applicability of these guidelines have been debated.

Australian law firm Cadena Legal has been outspoken about the ambiguity of these guidelines. In a Nov. 27 blog post, the company criticized the ATO’s guidance as “non-binding” rather than a clear public ruling. Cadena Legal stated that the guidance was invalid due to its lack of binding. In addition, the company highlighted that there is confusion in the application of Capital Gains Tax (CGT) in DeFi transactions under current guidelines.

The lack of a public ruling on the matter leaves a gray area for those engaged in DeFi activities. A public ruling will provide a clear, legally binding framework for taxpayers and reduce the confusion that prevails. In the absence of such a ruling, the current guidance adds uncertainty and could impact the tax compliance of the Australian crypto community.

Mixed reactions from experts

Dell has served as an ATO auditor and advised customers to ignore the ATO guidelines for the time being. This position stems from the belief that the current guidance is fearful and lacks clarity. Conversely, some cryptocurrency tax experts warn against ignoring the ATO’s guidelines. While not legally binding, these guidelines may still affect the legal process. As a result, they may ask the investor to seek legal assistance to challenge the ATO’s decision.

The clarity of Australia’s cryptocurrency taxation is still up in the air. Experts such as Dell say the solution may only be through strategic litigation or new legislation to address the gaps left by the current guidance of the Australian Taxation Office. Unfortunately, this development can take time, leaving stakeholders in a state of uncertainty.