Lost and found coins: cryptocurrency chain splits in Australia
Published Date: 15 Dec 2023
The Australian Taxation Office (ATO) provides guidance that the value of a new crypto asset received from a chain split is not treated as either ordinary income or capital gain at the time of the split, provided the owner holds it as a capital asset rather than in connection with carrying on a business. This article considers whether this guidance is well founded in cases where the crypto assets involved are cryptocurrency coins. In a chain split, the digital ledger on which cryptocoins are traded divides into two forks, resulting in two distinct cryptocurrencies. Each owner of a cryptocoin before the chain split ends up owning two separate coins, one of each of these cryptocurrencies. In its guidance, the ATO further provides that a chain split is generally not a capital gains tax (CGT) event unless the holder’s rights and relationships with respect to both post-split coins have changed, in which case the chain split will be treated as an abandonment of the original coin (CGT event C2). In all cases, any new cryptocoin is assigned a zerocost base, which is consistent with treating the coin as though it were found property. In this article, the authors question whether the ATO’s approach is consistent with the nature of cryptocurrency chain splits and with settled tax law, arguing that the approach can lead to tax outcomes that differ significantly from economic reality.
Sorry, this is subscriber only content.
To gain access to this material and much more - Subscribe Now.
(Note: Members can access Taxation in Australia journal articles without a Tax Knowledge Exchange subscription - please log in to access).
Already a Subscriber? Login now
Already a Subscriber? Login now
Details
- Published By: David G Chamberlain, Christina Allen
- Published On:15 Dec 2023
The material is copyright. Apart any fair dealing for the purpose of private study, research criticism or review, as permitted under the copyright Act, no part may be reproduced by any process without written permission from The Tax Institute.
Unless expressly stated, opinions are not that of The Tax Institute, which accepts no responsibility for the accuracy of any of the information contained within it.
The Tax Institute
(ABN 45 008 392 372 (PRV14016))
("TTI")
The Tax Institute is a Recognised Tax Agent Association (RTAA) under the Tax Agent Services Regulations 2009.
Copyright Statement
All materials provided on this site are protected by copyright and are owned by or licensed to TTI.
Except as expressly permitted by TTI or the copyright owner, any person or company who uses this site must not use, reproduce, redistribute, retransmit, publish or otherwise transfer, or commercially exploit, the materials or any information, software or other content, in whole or in part, which is available through this site.
Tags
Share this page