The Australian Taxation Office (ATO) has provided pivotal guidance on the capital gains tax (CGT) treatment concerning decentralized finance (DeFi) and the process of wrapping crypto tokens. This move is part of the ATO’s ongoing efforts to clarify tax obligations in the evolving domain of digital assets and blockchain-based finance.
DeFi, a form of finance leveraging blockchain technology to operate without traditional financial intermediaries, predominantly runs on the Ethereum blockchain. In DeFi, capital gains can occur, and the ATO has highlighted several CGT events (A1, E2, C2, H2) that might be relevant, depending on the specific arrangement’s nature.
A critical factor in determining CGT events is whether a trust relationship is established within the DeFi arrangement. This becomes significant in scenarios where the legal person holds the same type of asset for other beneficiaries, impacting the sole beneficiary status.
The…
