Do you have to pay a token airdrop tax?
Harrison Dell, tax attorney and director of Cadena Legal, says some notable recent airdrops likely to be handled by the ATO, as initial allocations include Ethereum Name Service ($ENS), LooksRare ($LOOKS) and ApeCoin ($APE ).
Many investors who filed their tax returns and received airdrops of new crypto in the 2021-22 fiscal year likely reported them on their returns as income.
Shane Brunette, co-founder and managing director of CryptoTaxCalculator, says investors who have already submitted their tax returns for the fiscal year should consider filing an amendment, as they may be able to reduce their tax liability or receive reimbursement.
The ATO guidelines also state that airdrops of new crypto, provided for free, will have a zero “cost basis” against which the calculation of capital gains or losses is referenced if the crypto is then sold or traded. against another virtual currency.
When the tokens are not free, the base cost will be the amount that was paid to acquire them, the ATO says.
Realized capital gains are subject to tax in the year in which the capital gains are realized.
If you hold your coin or token – or any other investment – for 12 months or more, you will likely qualify for a capital gains tax reduction.
If you realize a capital loss, it can be used to reduce capital gains realized in the same year or can be carried forward to future years.
Keeping track of crypto can be complex. There are crypto tax software providers, where investors can download a spreadsheet of trades from their exchange or crypto wallet.
The crypto transactions file is then uploaded to the crypto tax software, which generates a year-end tax report that can be entered into tax returns or provided to your tax agent.
Individuals have until October 31 to file their 2021-22 tax return. Those with tax agents and those who register with a tax agent by October 31, provided they have no outstanding issues with the ATO, have until mid-May to l next year to file their returns.
If in doubt about taxation, seek the advice of a qualified tax specialist.
- The advice given in this article is of a general nature and is not intended to influence readers’ decisions regarding investments or financial products. Before making financial decisions, they should always seek their own professional advice that takes into account their personal circumstances.