Australia imposes capital gains tax on decentralized currencies

 

Australia

imposes capital gains tax on

decentralized currencies

Australia announced a capital profit tax (CGT)

on digital asset transactions, including interactions with liquidity pools

and service providers

tokens and decentralized lending platforms.

The Australian Tax Office

(ATO) published new guidelines last week

in line with its efforts to expand the CGT tax base.

The move comes after investors were warned to report all profits

and capital losses related to digital assets, including non-replaceable codes (NFTs).

New guidance from

ATO includes tokens as a target area.

She explained the guidelines

When a digital asset is packaged or cancelled, the digital asset

is exchanged for another and CGT happens.

The capital proceeds of the CGT event are equal to the market value of the encapsulated symbol at the time of exchange, according to the tax authority.

The Australian Tax Agency (ATO)

carefully monitors the decentralized financing ecosystem (DeFi)

which is defined as "a model of financing based on encrypted technology

and implemented without a financial intermediary (NdDD)".

The tax agency indicates that most of DeFi's lending

and borrowing events will cause a CGT event.

These cases include exchanging distinct symbols

or waiving the symbol in exchange for the right to receive it at a later date.

ATO explains that the CGT

event occurs when the digital asset is transferred to the title

"uncontrollable"

or "which already contains a balance of

the same replacement encryption asset".

The return on capital of the CGT

event is equivalent to the market value of

crypto assets converted in exchange for the transfer of digital assets.

This could be in the form of other encrypted assets. "

The deposit or withdrawal of digital assets to the liquidity pool

is a CGT event according to ATO.

ATO added that

users receiving periodic rewards from digital assets on

the DeFi platform should be valued at the time of receipt as valuable income.

Australia's digital asset

community has criticized new taxes

and many believe they will hinder adoption and dependence on DeFi.