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The ATO has issued a draft ruling on the income tax and CGT treatment of certain crypto asset transactions.
Airdrops
Draft Taxation Ruling TR 2026/D1 considers the taxation of airdrops. The draft ruling confirms that where a taxpayer is carrying on a business of crypto asset trading, the market value of an airdropped crypto asset will generally be assessable as ordinary income, including where the airdrop is unsolicited or received as a gift or windfall. The same outcome applies where the airdrop is received in connection with goods, services or other income-producing activities.
For taxpayers not carrying on a business, the Commissioner's preliminary view is that an airdrop will generally not be assessable as ordinary income unless it is received as a reward for services or another income-producing activity. Instead, any tax consequences will typically arise on disposal of the asset, with CGT event A1 occurring at that time. The draft ruling also confirms that crypto assets received solely through a hobby or recreational activity will generally not be assessable.
Crypto wrapping and unwrapping
Draft Taxation Determination TD 2026/D2 addresses the CGT consequences of wrapping and unwrapping crypto assets. The Commissioner’s preliminary view is that CGT event C2 occurs when a taxpayer wraps an asset, as the original asset is surrendered to the smart contract and replaced with a separate wrapped asset. A further CGT event C2 occurs when the wrapped asset is subsequently unwrapped and extinguished.
Importantly, the ATO considers the wrapped asset to be a separate CGT asset from the original holding. As a result, the asset received on unwrapping is treated as a new asset with a separate acquisition history and cost base, rather than a continuation of the original holding.
Comments on TR 2026/D1 are due by 2 October 2026, while comments on TD 2026/D2 are due by 18 September 2026. The draft guidance highlights the ATO’s continued focus on crypto asset taxation and is a timely reminder for taxpayers involved in crypto markets and DeFi protocols to review their record keeping and tax treatment of airdrops and wrapping transactions.
