AUSTRALIAS CONFUSING NEW CRYPTO TAX GUIDANCE IS TOILET PAPER, SAYS LAW FIRM

Last updated: June 19, 2025, 22:12 | Written by: Cathie Wood

The world of cryptocurrency is already complex enough without the added headache of confusing tax regulations.For Australian crypto investors and traders, the recent guidance issued by the Australian Tax Office (ATO) regarding decentralized finance (DeFi) activities has been met with widespread criticism. Australia's controversial new guidelines for cryptocurrency taxation should be ignored for being unclear and should probably be seen as toilet paper, acco Australia s confusing new crypto tax guidance is toilet paper, says law firm - CryptoyoogOne Australian law firm, Cadena Legal, has gone so far as to label the new crypto tax guidance as essentially ""toilet paper,"" citing its unclear nature and lack of legal standing.This bold statement highlights the growing frustration and uncertainty surrounding the taxation of digital assets in Australia. Australia s confusing new crypto tax guidance is toilet paper, says law firm cointelegraph.com, UTCThe implications of this guidance could be far-reaching, potentially affecting how investors report their DeFi activities and, ultimately, impacting the growth of the crypto industry in the country. Australia's controversial new guidelines for cryptocurrency taxation should be ignored for being unclear and should probably be seen as toilet paper, according to an Australian law firm.On Nov. 9, the Australian Tax Office (ATO) released guidanceNavigating this landscape requires a clear understanding of the issues and, potentially, a healthy dose of skepticism. Australia's controversial new guidelines for cryptocurrency taxation should be ignored for being unclear and should probably be seen as toilet paper, according to an Australian law firm.On Nov. 9, the Australian Tax Office (ATO) released guidance that could impact how investors and traders involved inThis article will delve into the specifics of the ATO's guidance, explore the criticisms leveled against it, and provide insights into how crypto investors can navigate this complex and ever-evolving regulatory environment.

Understanding the ATO's New DeFi Tax Guidance

On November 9th, the Australian Tax Office (ATO) released guidance pertaining to the taxation of activities within the decentralized finance (DeFi) space. Australia's controversial new guidelines for cryptocurrency taxation should be ignored for being unclear and should probably be seen as toilet paperDeFi, characterized by its peer-to-peer financial services built on blockchain technology, presents unique challenges for traditional tax frameworks.The ATO's guidance aimed to clarify how existing tax laws apply to activities like staking, yield farming, lending, and borrowing of crypto assets.

The document attempts to address various aspects of DeFi taxation, including:

Income Tax: How staking rewards and yield farming returns are treated as income.
Capital Gains Tax (CGT): How the disposal of crypto assets in DeFi transactions is subject to CGT.
Record Keeping: The importance of maintaining detailed records of all DeFi transactions.

However, the guidance has been criticized for its lack of clarity and its failure to adequately address the complexities of DeFi.This has led to confusion and uncertainty among crypto investors and tax professionals alike.

Why Cadena Legal Calls It ""Toilet Paper""

Cadena Legal's strong criticism, comparing the ATO's guidance to ""toilet paper,"" stems from several key concerns.Founder Harrison Dell argues that the guidance lacks legal backing and fails to provide clear, practical instructions for taxpayers.In a blog post on Cadena Legal's website, Dell emphasizes the non-binding nature of the guidance and its potential for misinterpretation.

Here's a breakdown of the firm's main points of contention:

Lack of Legal Standing: The guidance is not legally binding, meaning it's an interpretation of the law rather than the law itself.
Unclear Language: The document uses ambiguous language and fails to define key terms, making it difficult to understand and apply.
Oversimplification of Complex Transactions: DeFi transactions are often intricate and involve multiple layers, which the guidance fails to adequately address.
Potential for Inconsistent Application: The lack of clarity could lead to inconsistent application of the rules by different tax officers.

According to Cadena Legal, taxpayers are better off seeking professional advice and relying on existing tax laws rather than attempting to decipher the ATO's confusing guidance.

The Implications of Unclear Crypto Tax Guidance

The ambiguity surrounding crypto taxation has significant implications for the Australian crypto industry.The lack of clear rules can:

Deter Investment: Uncertainty can discourage investors from participating in the crypto market.
Increase Compliance Costs: Investors may need to spend more time and money seeking professional advice to ensure compliance.
Hinder Innovation: The lack of regulatory clarity can stifle innovation in the DeFi space.
Create Enforcement Risks: The ATO may struggle to enforce the rules effectively due to their ambiguity.

Ultimately, unclear crypto tax guidance can hinder the growth of the digital asset market in Australia and put the country at a disadvantage compared to other jurisdictions with more comprehensive and clear regulatory frameworks.

What Should Crypto Investors Do? Australia s confusing new crypto tax guidance is toilet paper, says law firm r/CryptoCurrency_V2_ Australia s confusing new crypto tax guidance is toilet paper, says law firmPractical Advice

Given the uncertainty surrounding the ATO's DeFi tax guidance, what steps should crypto investors take to ensure compliance and protect themselves from potential tax issues?

Maintain Detailed Records: This is crucial.Document every transaction, including dates, amounts, asset types, and the purpose of the transaction.Use crypto tax software if possible to help automate this process.
Seek Professional Advice: Consult with a qualified tax advisor who understands crypto and DeFi. Australia s confusing new crypto tax guidance is toilet paper, says law firm Crypto Signal Leak 150 Best Vip channels of the world - Crypto leak I m effectively telling individuals they are best disregarding it, Cadena Legitimate s organizer tells Cointelegraph after dubious new expense direction on DeFi was delivered in November.They can help you interpret the regulations and ensure you're compliant.
Focus on Existing Tax Laws: Prioritize adherence to established tax principles rather than relying solely on the ATO's unclear guidance.
Stay Informed: Keep up-to-date with any changes in the regulatory landscape and be prepared to adapt your approach as needed.
Document Your Reasoning: If you interpret the guidance in a particular way, document your reasoning and the rationale behind your decisions.This can be helpful in case of an audit.

Examples of DeFi Transactions and Their Potential Tax Implications

Let's consider some specific examples of DeFi transactions and how they might be treated under the existing tax framework:

Staking

Scenario: You stake 1 ETH in a DeFi protocol and earn 0.1 ETH in rewards.

Tax Implications: The 0.1 ETH earned as staking rewards is likely considered income and is taxable at your marginal tax rate. Australian Tax Office s Controversial Crypto Taxation Guidelines Ignored and Labelled as Toilet Paper Australia s controversial new guidelines for cryptocurrency taxation have been ignored by many due to their unclear nature; they have even been labelled as toilet paper by Cadena Legal, an Australian law firm. On Nov. 9, the Australian Tax Office (ATO) released guidanceYou'll need to determine the fair market value of the ETH at the time you received it.

Yield Farming

Scenario: You provide liquidity to a DeFi pool and earn tokens as a reward.

Tax Implications: The tokens earned through yield farming are also likely considered income. Australia's controversial new guidelines for cryptocurrency taxation should be ignored for being unclear and should probably be seen as toilet paper, according to an Australian law firm.When you later dispose of those tokens, you may also trigger a capital gains tax event.

Lending and Borrowing

Scenario: You lend out your USDT on a DeFi platform and earn interest.

Tax Implications: The interest earned is likely considered income.If you use borrowed funds to acquire assets that later increase in value, the capital gains will still be taxable, but you won't be able to deduct the borrowing costs unless you meet specific criteria.

Providing Liquidity to Pools

Scenario: You provide ETH and DAI to a liquidity pool and earn transaction fees.

Tax Implications: Earning transaction fees in exchange for providing liquidity generally constitutes income.The amount is usually determined by the fair market value of the tokens earned.Be mindful of the potential capital gains implications when withdrawing your liquidity from the pool; the values of your ETH and DAI might have changed since deposit.

Navigating Capital Gains Tax (CGT) in DeFi

Capital Gains Tax (CGT) is a particularly complex area when it comes to DeFi.Every disposal of a crypto asset, including those within the DeFi ecosystem, can trigger a CGT event.This includes:

Swapping one crypto for another.
Providing liquidity to a pool and receiving LP tokens.
Using crypto to purchase goods or services.

Calculating your capital gain or loss requires determining the cost base of the asset and the proceeds from the disposal.Proper record-keeping is essential for accurately calculating CGT.

The Importance of Record Keeping

Maintaining accurate records of all crypto transactions is paramount for tax compliance.This includes:

Dates of transactions.
Amounts of crypto bought, sold, or exchanged.
The value of the crypto in Australian dollars at the time of the transaction.
The purpose of the transaction.
Wallet addresses involved.
Transaction hashes.

Using crypto tax software can help automate this process and simplify tax reporting.However, it's still important to review the data and ensure its accuracy.

The Role of Crypto Tax Software

Several crypto tax software platforms are available that can help automate the process of tracking and reporting crypto transactions. Australia s confusing new crypto tax guidance is toilet paper, says law firm Australia s confusing new crypto tax guidance is toilet paper, says law firmThese platforms can:

Import transaction data from various exchanges and wallets.
Calculate capital gains and losses.
Generate tax reports.

However, it's important to choose a reputable platform and to verify the accuracy of the data it provides. Australia s confusing new crypto tax guidance is toilet paper, says law firm cointelegraph.com Open. Locked post. New comments cannot be posted.No software is perfect, and human oversight is still necessary.

Challenging the ATO's Interpretation

Given the ambiguity of the ATO's guidance, some taxpayers may choose to challenge its interpretation. An Australian crypto tax lawyer has suggested the ATO s new DeFi tax guidance is single-ply toilet toilet paper at best, arguing the guidance is not backed by legal standing. In a blog post published on Cadena Legal s website, the firm s founder Harrison Dell, says the ATO has a much better, though still limited, tool at itsThis could involve:

Seeking a private ruling from the ATO on a specific transaction.
Disputing an assessment issued by the ATO.
Appealing a decision to the Administrative Appeals Tribunal (AAT).

Challenging the ATO can be a complex and costly process.It's essential to seek professional advice before taking this step.

What Happens if You Don't Comply?

Failure to comply with Australian tax laws can result in penalties, including:

Interest charges.
Fines.
In severe cases, criminal prosecution.

It's always better to err on the side of caution and seek professional advice to ensure compliance.

Looking Ahead: The Future of Crypto Taxation in Australia

The debate surrounding crypto taxation in Australia is likely to continue as the industry evolves. Australia s controversial new guidelines for cryptocurrency taxation should be ignored for being unclear and should probably be seen as toilet paper, according to an Australian law firm. On Nov. 9, the Australian Tax Office (ATO) released guidance that could impact how investors and traders involved in decentralized finance report their taxes. In a Nov. 27It's crucial for the ATO to provide clearer and more comprehensive guidance that reflects the complexities of the digital asset market.Dialogue between regulators, industry stakeholders, and tax professionals is essential for developing a fair and effective tax framework.As digital assets become increasingly integrated into the financial system, a clear and consistent regulatory approach is needed to foster innovation and protect investors.

Frequently Asked Questions (FAQs)

Is the ATO's DeFi tax guidance legally binding?

No, the ATO's guidance is not legally binding.It represents the ATO's interpretation of existing tax laws and is not a substitute for the law itself.

What is the best way to keep track of my crypto transactions for tax purposes?

The best approach is to maintain detailed records of all transactions, including dates, amounts, asset types, and the purpose of the transaction. Australia s controversial new guidelines for cryptocurrency taxation should be ignored for being unclear and should probably be seen as toilet paper, according to an Australian law firm. On Nov. 9, the Australian Tax Office (ATO) released guidance that could impact how investors and traders involved in decentralized finance report theirCrypto tax software can help automate this process.

Should I seek professional advice from a tax advisor?

Yes, if you're involved in crypto or DeFi, it's highly recommended to seek professional advice from a qualified tax advisor who understands the complexities of digital asset taxation.

What happens if I make a mistake on my crypto tax return?

If you discover an error on your tax return, you should amend it as soon as possible. Australia s confusing new crypto tax guidance is toilet paper, says law firm. Australian law firm Cadena Legal published a blog post highlighting that the unclear DeFi rules released byPenalties may apply if you intentionally provide false or misleading information.

Are NFTs subject to capital gains tax?

Yes, NFTs are generally considered CGT assets.The sale or disposal of an NFT can trigger a capital gains tax event.

Conclusion: Navigating the Crypto Tax Maze

The Australian crypto tax landscape, particularly concerning DeFi, remains complex and uncertain.Cadena Legal's strong critique of the ATO's guidance highlights the need for clearer and more comprehensive regulations.While the future of crypto taxation in Australia is still unfolding, crypto investors can take proactive steps to protect themselves and ensure compliance. 3.8K subscribers in the coinspotau community. Welcome to the official CoinSpot subreddit, feel free to talk about all things crypto and CoinSpotThis includes maintaining detailed records, seeking professional advice, and staying informed about regulatory changes.Remember, navigating the crypto tax maze requires a combination of diligence, knowledge, and, perhaps, a touch of healthy skepticism toward potentially confusing ""toilet paper"" guidance. Australia s controversial new guidelines for cryptocurrency taxation should be ignored for being unclear and should probably be seen as toilet paper, according to an Australian law firm. On Nov. 9, the Australian Tax Office (ATO) released guidance that could impact how investors and traders involved in decentralized finance report their taxes. In a Nov. 27 [ ]By staying informed and seeking expert advice, you can navigate the complexities of crypto taxation and ensure you're meeting your obligations while maximizing your investment opportunities. Posted by u/Sharp-Subject-047 - 12 votes and 22 commentsIt's time for the ATO to prioritize clarity and create a regulatory environment that fosters innovation and growth in the Australian crypto market. Consult with a qualified tax professional today to discuss your specific situation and develop a comprehensive tax strategy.