Are token airdrops subject to tax?

Some of the high-profile airdrops that have occurred recently are the Ethereum Name Service ($ENS), LooksRare(LOOKS) or ApeCoin (APE), according to Harrison Dell who is a Cadena Legal director as well as a tax lawyer.

It is possible for many of those who have filed tax returns and received airdrops with new cryptocurrency in the 2021-22 fiscal years to declare their income.

Co-founder and CEO at CryptoTaxCalculator Shane Brunet says that investors who have filed their fiscal year tax returns for the past year should file an adjustment to reduce or receive a refund.

The ATO guidelines also state that new cryptocurrency airdrops, offered free of charge, will have a “cost base” of zero against which capital gains or losses will be calculated if the cryptocurrency is subsequently sold or exchanged for another virtual currency.

If the tokens aren’t free, then the cost base will be what was paid to obtain them, according to the ATO.

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Capital gains realized are subject to tax in each financial year they are realized.

You will be eligible for a capital gains deduction if you have held a token or coin for more than 12 months.

Capital losses can be used to offset capital gains in the same fiscal year, or carried forward to future years.

It can be difficult to keep track of cryptocurrency transactions. Investors can access a spreadsheet containing transactions from cryptocurrency wallets or exchanges via crypto tax software providers.

The file containing crypto transactions is uploaded to the crypto-tax software. This generates a tax report for the year that can be used to fill out tax returns or to send to your tax agent.

Individuals can file their 2021-22 tax return by October 31. Tax agents or those who register before October 31 and have no outstanding issues with ATO will be able to file their returns by mid-May next year.

Get qualified tax advice if in doubt about taxes

• This article’s advice is general and not intended to make readers decide about investing or financial products. They should always seek out professional advice that takes into consideration their personal circumstances before making financial decisions.

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Originally published at Brisbane News Station