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Highlights
- NFTs like CryptoPunks and cryptos like DOGE use the same decentralised ledger tech, but both are not exactly similar
- An NFT usually represents an intangible asset like a tweet, but lately, even tangible assets have been rolled out
- In Australia, NFTs are treated as crypto assets by the taxation authority, and taxes must be paid on a profitable sale
Non-fungible tokens (NFTs) were late entrants compared to cryptocurrencies. Bitcoin provided fuel for the global popularity of cryptocurrencies, including in Australia. Later assets like ETH (Ethereum), and DOGE (Dogecoin), also helped elevate the status of native tokens and meme coins, respectively, all of which fall under the ambit of cryptocurrencies. These assets can be traded using intermediaries like exchanges, but are NFTs also so easily accessible?
First, NFTs are not exactly like cryptocurrencies, even though both use decentralised ledger technology. NFTs are representative blockchain-based tokens of some other underlying item, either tangible or intangible. Let us explore NFTs’ availability in Australia and their tax implications.
NFTs in Australia
Blockchain-based assets are available globally, and there is no physical delivery when a backer decides to buy one. That said, a few countries like China do not allow investments in Bitcoin and altcoins, so NFT trading in such jurisdictions falls in the grey area due to a lack of specific rules. In Australia, and since the Australian Taxation Office (ATO) has issued specific directions on crypto and NFT taxation, it can be implied that NFTs can be bought and sold without restrictions.
NFT intermediaries exist in Australia, with Binance and OpenSea to name a few. But all NFTs, including Beeple’s artworks or assets of a particular platform like CryptoPunks, might not be listed on all these exchanges. If a user is interested in a specific NFT, they need to browse listed assets to check availability. Most NFTs use Ethereum as the underlying recording blockchain, which implies that purchase activities are stored on Ethereum’s decentralised network. Lastly, NFT assets are as volatile in terms of prices as assets like Bitcoin.
Data provided by CoinMarketCap.com
NFTs and ATO
In Australia, the ATO specifically defines what constitutes a capital gains tax (CGT) event. The agency considers cryptocurrencies and NFTs on par, and both fall under the definition of ‘crypto assets’. Capital gains on the transaction, arising in the event of a sale, attract tax, and hence, the related party should ensure keeping records. Even gifting such assets or swapping one asset for another can give rise to a CGT event.
Bottom line
NFT assets are available in Australia, but there is a possibility that a particular asset like CryptoPunks might not be listed on all exchanges. A number of intermediaries function in Australia, and the user has to browse the list to check the availability of a specific NFT asset. The ATO treats NFTs like cryptocurrencies, which means CGT is applicable when the holder liquidates an asset and makes profit.
Risk Disclosure: Trading in cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory, or political events. The laws that apply to crypto products (and how a particular crypto product is regulated) may change. Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading in the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed. Kalkine Media cannot and does not represent or guarantee that any of the information/data available here is accurate, reliable, current, complete or appropriate for your needs. Kalkine Media will not accept liability for any loss or damage as a result of your trading or your reliance on the information shared on this website.
