Wrapped Cryptocurrency Tokens to Face Capital Gains Tax in Australia

By: Eva Baxter

The Australian Taxation Office (ATO) recently updated its standing on capital gains tax (CGT) to include wrapped tokens and decentralized finance (DeFi), which may affect a large number of crypto investors. According to the ATO, wrapping or unwrapping tokens - no matter their price at the time - triggers a taxable CGT event. The ATO also clarified that the transfer of crypto assets to an uncontrolled address or one that holds a prior balance will be considered a taxable CGT event.

Furthermore, the ATO stated: “When you wrap or unwrap a crypto asset, you exchange one crypto asset for another and a CGT event happens.” This new policy has received criticism for breaching technology neutrality principles and impacting the financial future of young Australians. Alongside, there is increased pressure following a probable privacy key compromise on local crypto exchange CoinSpot that led to a $2.4 million heist.

As hackers targeted CoinSpot, 1,262 Ether (ETH) worth $2.4 million was transferred from a publicly known CoinSpot wallet to the alleged hacker’s wallet. The stolen Ether was subsequently converted to Bitcoin (BTC) and dispersed across different wallet addresses.