Announcements
Looking for answers? Search our popular topics or ask a new question.

ATO Community

Tax implications of DeFi loaning applications such as compound.finance

Newbie

Views 1818

Replies 11

I am wondering what the tax implications are when loaning out stablecoin tokens through a decentralized finance platform such as compound.finance or Dharma. The ATO website mentions neither stablecoins nor this specifiic loan use case, probably because it is relatively new.

  • One option would be to record the earned tokens as a purchase at value 0 and declare the interest gain when they are spent. I believe this is the option that makes most sense if I strictly follow the rules outlined in the ATO's cryptocurrency guide.
  • Another option would be to treat the earned tokens like interest on a bank account, i.e., to record them as a purchase at market value when payout happens, and declare this value immediately.

As far as the ATO is concerned, do stablecoins exist as pegged to a fiat currency, or are they just another speculative cryptocurrency since they carry the inherent risk of failing?

I hope this forum is still active and someone can give me advice on this.

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Community Support

Replies 8

Hi @prouast,

 

Thanks for your patience whilst we received information from a specialist area about your query!

 

You have asked some good questions here. There is currently no specific ATO view on these matters and we would like to consider this issue further.

 

However, the following points may be relevant:

 

Each cryptocurrency coin or token is treated as a separate CGT asset. Where these items are disposed of in any way, a CGT event arises and CGT needs to be calculated. Where a cryptocurrency coin or token is acquired as a CGT asset its cost base needs to be established. In some cases the receipt of a coin or token may represent assessable income.

 

Thanks, JodieH.

11 REPLIES 11

Community Support

Replies 10

Hi @prouast,

 

Welcome to our Community!

 

We've emailed a specialist area to see if we can provide a response to your query, we hope to get back to you with advice as soon as possible.

 

Thanks, JodieH.

Newbie

Replies 9

Thanks Jodie, much appreciated. Will wait with my tax return until I hear back.

Most helpful response

Community Support

Replies 8

Hi @prouast,

 

Thanks for your patience whilst we received information from a specialist area about your query!

 

You have asked some good questions here. There is currently no specific ATO view on these matters and we would like to consider this issue further.

 

However, the following points may be relevant:

 

Each cryptocurrency coin or token is treated as a separate CGT asset. Where these items are disposed of in any way, a CGT event arises and CGT needs to be calculated. Where a cryptocurrency coin or token is acquired as a CGT asset its cost base needs to be established. In some cases the receipt of a coin or token may represent assessable income.

 

Thanks, JodieH.

Newbie

Replies 0

Thank you for getting back to me, Jodie.

 

I am interpreting your reply to mean that the ATO views stablecoin token just like any other cryptocurrency asset. Hence, I will be following option 1 from my original post, until there is further information from the ATO regarding this.

 

Best,

Philipp

Initiate

Replies 6

Hello Jodie

 

Has the ATO come to a determination of income from crypto lending on defi platforms yet?

 

Should this be treated as income similar to a staking reward? 

 

This field of crypto is rapidly growing and further guidance from the ATO would be great.

 

Thanks

Community Manager

Replies 0

Hi @PaulKittson

 

We will check this one out for you and let you know. 

 

KylieS 

Community Manager

Replies 4

Hi @PaulKittson,

 

Yes, you should treat any ‘earned’ tokens described as ‘interest’ as income, in the same way as staking rewards and airdrops. This is set out in examples 1 and 2 from Staking rewards and airdrops.

 

That is, the value of the tokens received as interest is treated as amounts needing to be declared in your tax return and the cost base of the acquired  tokens will also be that same value. See also this post regarding  Tax-implications-on-lending-Bitcoin for a general approach to lending cryptocurrency.

 

KylieS

Newbie

Replies 3

"Tax-implications-on-lending-Bitcoin for a general approach to lending cryptocurrency."

 

Thie link above still suggests that in some circumstances where you move your coin or token to an exchange you are transferring ownership resulting in a taxable event, regardless if you sell said coin or token. Is this still the ATO's opinion?

 

It also states its possible that the "exchange never actually acquires the crypto but simply negotiates to sell it on your behalf" not resulting in a taxable event until a buyer is matched and transaction confirmed. Does this mean we need to read the T&C's of each exchange to determine if ownership is transferred?

 

Happy to be corrected.

 

Thanks..

ATO Certified Response

Community Support

Replies 2

Hi @Justlistening

 

Yes, we are still of that opinion. Our most up to date information about the tax treatment of cryptocurrencies can be found on our website. If there are any changes, we will update that section of our website accordingly.

 

If you would like us to take a closer look at your situation, you can request an early engagement discussion with us. For more information about our early engagement for advice service, refer to our website.

 

Hope this helps.

 

Thanks, ChrisR