Latest News
Hot Issues
Budget breakdown – Federal Government Analysis
Winners & Losers
Federal Budget 2024
2024 Year End Tax Planning Guide (Part 1)
Medicare levy surcharge OR basic health insurance ?
ATO warns of ‘serious penalties’ for unlawful tax scheme promoters
ACCC scam report
Employees taking more sick days - and it's getting worse
Foreign residents selling property in Australia
How much does negative gearing really cost – an overview and an opinion?
The Shortest-reigning Monarchs in History
FBT Reminder – Odometer Reading
ATO’s debts on hold campaign prompts new IGTO guidance
A comprehensive collection of small business benchmarks
The 2025 Financial Year tax & super changes you need to know!
Underperforming employees: When can you terminate?
A comprehensive list of guides to industry specific tax deductions.
‘Renewed concerns’ about economy sees consumer sentiment dip: Westpac
Oldest Buildings in the World.
Small businesses may ‘collapse under strain of payday super’, IPA warns
ATO’s hands tied with scrapping on-hold debts, expert says
What Drives Your Business Growth and Profits?
Australian Taxation Office (ATO) shifting to firmer debt collection activity
Why employee v contractor comes down to fine print
Sharing economy reporting regime for platform operators
Countries producing the most solar power by gigawatt hours
Illegal access nets $637 million
Accessing superannuation benefits.
Does your business have a company Power of Attorney?
Labor tweaks stage 3 tax cuts to make room for ‘middle Australia’
Current Articles
Vimeo test
Articles archive
Quarter 1 January - March 2024
Quarter 4 October - December 2023
Quarter 3 July - September 2023
Quarter 2 April - June 2023
Quarter 1 January - March 2023
Quarter 4 October - December 2022
Quarter 3 July - September 2022
Quarter 2 April - June 2022
Quarter 1 January - March 2022
Quarter 4 October - December 2021
Quarter 3 July - September 2021
Quarter 2 April - June 2021
Quarter 1 January - March 2021
Quarter 4 October - December 2020
Quarter 3 July - September 2020
Quarter 2 April - June 2020
Quarter 1 January - March 2020
Quarter 4 October - December 2019
Quarter 3 July - September 2019
Quarter 2 April - June 2019
Quarter 1 January - March 2019
Quarter 4 October - December 2018
Quarter 3 July - September 2018
Quarter 2 April - June 2018
Quarter 1 January - March 2018
Quarter 4 October - December 2017
Quarter 3 July - September 2017
Quarter 2 April - June 2017
Quarter 1 January - March 2017
Quarter 4 October - December 2016
Quarter 3 July - September 2016
Quarter 2 April - June 2016
Quarter 1 January - March 2016
Quarter 4 October - December 2015
Quarter 3 July - September 2015
Quarter 2 April - June 2015
Quarter 1 January - March 2015
Quarter 4 October - December 2014
How crypto assets can trigger CGT tripwires

Lending digital currency can be viewed as disposal while losses from the recent downturn may offer little relief from previous capital gains.


In its October 2021 report, the Select Committee on Australia as a Technology and Financial Centre (Senate Report) canvassed the uncertainty and potential harsh tax outcomes presented by cryptocurrencies and other digital assets.

In particular, the Senate Report discussed how the existing tax framework did not contemplate such technology, and as a result, whenever a crypto asset interacts with a protocol where it is swapped, accessed, staked, wrapped, burned or exchanged, CGT event A1 may be triggered.[1]

Regardless of whether you are familiar with these precise terms, the point to note is that when it comes to digital assets, CGT liabilities may be inadvertently triggered in cases where there may have been no underlying disposal, including, for instance, from mere technological upgrades akin to a stock split.[2]

Once triggered, taxpayers cannot rely on CGT rollover relief to mitigate the consequences of this outcome as the strict and limited requirements for rollover do not extend to digital assets.

After outlining these potential tax issues by reference to various submissions, the Senate Report recommended that the CGT regime be amended so that digital asset transactions only create a CGT event when they genuinely result in a clearly definable capital gain or loss.[3]

An example of an inadvertent tax liability – “lending” or “staking” digital assets

By way of example, it may surprise some crypto users that an ATO officer had informally flagged that “lending” digital assets may trigger CGT event A1 (a disposal).[4]  So while a “lender” may consider that they continue to hold the “lent” asset”, depending on the particular terms under which it occurs, the “lending” may actually result in a disposal within the meaning of CGT event A1.

Although the latest FTX scandal may have constituted fraud, it serves as a timely reminder of the need to carefully and thoroughly understand how each product/arrangement is governed and what risks exist, including counterparty risk. It is only by carefully analysing the terms of the arrangement and understanding your precise legal rights as the “lender” that the commercial risks and resulting taxation implications can be properly identified.

To this end, the specific terms adopted to conveniently describe an offering may not accurately reflect the actual commercial and legal realities.

To properly understand the tax ramifications of “lending” digital assets, including whether CGT event A1 is triggered, it may be necessary to consider whether the “lender” will continue to hold legal title and/or beneficial title. The analysis of whether ownership is retained can be further complicated in circumstances where the “lender” relinquishes control of the digital assets and subjects it to a self-executing “smart contract”.


It is important not to rely on labels but to properly review the terms of all arrangements and new product offerings to ensure you understand your rights. It is only after doing so that you can properly assess the risks as well as the taxation ramifications.

Digital assets, including bitcoin, are not regarded as currencies and that outcome is about to be enshrined in legislation. As a result, they will likely fall within the CGT regime and they will not be eligible for the Commissioner’s administrative indulgence not to treat them as CGT assets.[5]

Crystallising large capital losses during the latest downturn may be of limited use in mitigating the consequences of having triggered inadvertent capital gains at market highs in earlier income years.

The Board of Taxation is considering the tax treatment of digital assets and is due to report this month.

Jeremy Makowski is special counsel in tax at law firm Cornwalls.


Jeremy Makowski
23 December 2022

Privacy Policy | Disclaimer