An Australian law firm has criticized the clarity and controversial nature of Australia’s cryptocurrency taxation guidelines, likening them to “toilet paper.”
The Australian Tax Office (ATO) released guidance on Nov. 9, outlining potential tax implications for decentralized finance (DeFi) activities. However, in a Nov. 27 blog post, Cadena Legal highlighted the non-binding nature of the guidance, arguing that it should not be considered a binding public ruling but rather equated to “toilet paper.”
We covered the ATO’s DeFi rulings in an article here.
The legal team emphasized widespread confusion regarding Australians’ actions within DeFi without incurring capital gains tax (CGT). Harrison Dell, the firm’s founder, expressed to Cointelegraph that clarity would come from a public ruling:
“If the ATO released a public ruling, we could all rely on that, but instead, we have this non-binding nonsense which makes everyone more confused and will probably reduce willing tax compliance by the Australian crypto community.”
Dell, a former ATO auditor from 2017 to 2019, advised his clients to temporarily disregard the regulations:
“[It] is causing panic in the Australian crypto community. I am actively telling people they are best ignoring it and get their own advice.”
However, a cryptocurrency tax expert cautioned against disregarding ATO guidelines, highlighting potential risks. They argued that despite not being legally binding, investors might face legal challenges and the need for legal representation if the ATO deems their actions contrary to their guidance.
Publications reached out to the ATO on Nov. 21 seeking clarification on activities like transferring funds through a bridge or staking Ether (ETH) on a liquid staking protocol like Lido, but the ATO did not provide a direct response.
In contrast, Dell’s perspective leans toward these on-chain activities more likely triggering a CGT event, based on his oversight of a few private rulings.
“The ATO essentially said any token-to-token transaction is taxable and would likely include transferring a token from an L1 to an L2.”
“Whether this is correct or not is very difficult to say, as the ATO did not provide any useful reasons in their web guidance,” Dell stated.
Dell indicated that the regulations would stay ambiguous until either a public ruling clarifies matters or the government introduces new legislation to address the voids left by the ATO.
“In reality, I suspect we will all have to wait until someone strategically litigates these matters,” Dell said. “All of these solutions will take a long time, unfortunately.”
