Edited version of private advice

Authorisation Number: 1052228825074

Date of advice: 4 March 2024

Ruling

Subject: Cryptocurrency transactions

In this ruling, 'TOFA rules' means the provisions in Division 230 of the Income Tax Assessment Act 1997 (about the taxation of financial arrangements).

Question 1

Will the TOFA rules apply to cryptocurrency transactions entered by the company using the arbitrage function?

Answer No.

Question 2

Will the TOFA rules apply to cryptocurrency held by the company other than for trading under the arbitrage function?

Answer No.

Question 3

Will the TOFA rules apply to cryptocurrency held by the discretionary trust?

Answer No.

Question 4

Will the TOFA rules apply to gold and silver bullion held as investments on the company's balance sheet?

Answer No.

Question 5

If the answer to any of Questions 1 through 4 is 'yes', will the realisation method be the most appropriate for determining TOFA gains and losses?

Answer

Not applicable because the answer to Questions 1 through 4 is 'no'.

Question 6 If the answer to Question 1 is 'yes', will the TOFA gain be the additional cryptocurrency generated as a result of the arbitrage function, with ordinary cryptocurrency disposals being sales revenue and ordinary cryptocurrency acquisitions being purchases?

Answer

Not applicable because the answer to Question 1 is 'no'.

This ruling applies for the following period: 1 July YYYY to 30 June BBBB

The scheme commenced on:

1 July YYYY

Relevant facts and circumstances

1. An individual taxpayer developed a cryptocurrency trading bot, taking advantage of arbitrage opportunities present in "digital liquidity pools".

2. The bot sends a transaction to one of its smart contracts, which consolidates multiple trades into one transaction.

3. An example of such a transaction would be Coin A>Coin B>Coin C>back to Coin A. This represents one single transaction on the smart contract.

4. The effect of the transaction is an increase in the balance of the respective coin that was the subject of the arbitrage transaction. For example, the balance of Coin A at the conclusion of the transaction is higher than the balance of Coin A that is sitting in the smart contract initially - that is, the transaction starts with an amount of x of Coin A and ends with x+dx of Coin A.

5. The trading activities are conducted through a company which is wholly owned by a discretionary trust.

6. The bot generates a substantial level of turnover. Each individual transaction entered into by the trading bot doesn't hold substantial value and many transactions only yield a small profit. (This edited version has redacted information about the company's turnover for the relevant income years.)

Transactions, trades and turnover

7. The number of transactions each day are variable and depend on the activity on the network.

• Many transactions are sent, but not all succeed. About x% of transactions fail under the current version of the bot.
• Under the current market conditions, the current version of the bot sends about x transactions per day.
• Over a recent 7-day period there were several thousand successful trades.

8. Table 1 had informationfor the client's actual turnover for relevant periods.

Table 1: turnover for relevant periods (redacted for privacy concerns)

Trading bot and uncertainty

9. The trading bot enters transactions independently of any human oversight. Once the arbitrage opportunity is identified the bot sends a transaction to a smart contract which consolidates multiple trades and is completed in a single smart contract transaction.

10. Once the trading bot sends a transaction to the smart contract, the exchanges from CoinA>CoinB>CoinC>Coin A are all completed in a single smart contract transaction on the same day. Once the arbitrage transaction is completed the cryptocurrency is delivered immediately.

11. Cryptocurrency prices are extremely volatile, so the amounts/values of cryptocurrency exchanged upon entering into the execution of the smart contract can vary from time to time.

12. The bot is able to calculate the expected profit for a given trade. However, there are several factors which can interfere with the trade, and cause the transaction either to fail, or to return a different profit/loss than expected. The primary factor is competition from other arbitrage traders. If another arbitrage trader is faster, their transaction will be executed before the taxpayer's, which usually results in the taxpayer's attempted trade failing. Alternatively, the trade may return a smaller profit than expected. It's also possible for ordinary trading activity to affect the state of the network, and alter the returns on a trade.

13. The exchange rates within pools can change between the time the bot sends the transaction and it being executed. This usually results in the transaction failing.

Exchanges used by the arbitrage function

14. All the cryptocurrency exchanges the company uses for the arbitrage trades are decentralised. The exchanges are smart contracts operating on the blockchain. They use an automated market making algorithm to facilitate trades.

15. The company currently uses over x different exchanges/liquidity sources.

16. The arbitrage function uses a select number of starting coins for an arbitrage trade, but may swap them with a large and unverifiable number of intermediate coins. In the example used in paragraph 3, Coin A is a starting coin, and Coins B and C are intermediate coins. Starting coins are usually determined by which coin a network uses to pay fees in.

17. The company currently only uses x <being a type of cryptocurrency available on exchanges> as a starting coin in arbitrage trades.

18. It's impractical to list or keep track of intermediate coins. The arbitrage software is able to identify and use completely new coins shortly after they are added to a decentralised exchange. The only common feature of these coins is that they are all in liquidity pools on decentralised exchanges and can be traded.

19. Successful arbitrage trades result in an increased coin balance of the starting coin traded. The company allows these increases to accumulate.

Other cryptocurrency transactions - the company

20. The company also undertakes other cryptocurrency transactions outside the arbitrage function. After the company acquires cryptocurrency coins through arbitrage trading on liquidity pools, it transfers them to a centralised exchange. It periodically trades those coins for cash, other cryptocurrencies (such as Bitcoin), or stablecoins (such as USDT). These non-arbitrage trades are much less common and are only executed when the company's director sees a good trading opportunity (to make a short-term profit) or would like to cash out some cryptocurrency (by making a cash withdrawal from the exchange). Once the company identifies a trading opportunity, it sells fiat or cryptocurrency to purchase a different coin (such as Bitcoin). The company only holds the coins until it meets the short-term profit target. It then sells the coins for either a stablecoin or cash on a centralised exchange. All non-arbitrage trades are much less frequent, and arbitrage profits may be held for some time, perhaps months, before being traded for something else.

Other cryptocurrency holdings

21. The discretionary trust makes other cryptocurrency trades separately to the bot activity. The other cryptocurrency trades are conducted on centralised and decentralised exchanges.

22. The trustee's intension is to hold these tokens long-term for capital growth. None of the tokens have been sold. <Paragraph partly redacted for privacy concerns.>

23. To clarify, the company doesn't currently make or hold any long-term cryptocurrency investments. All long-term investments are done through the discretionary trust.

Gold and silver bullion

24. The company invests in gold and silver bullion, making purchases in the XXXX & YYYY financial years. It intends to hold this bullion as long-term investments and will record them as investments on its balance sheet.

25. The company holds x oz of silver and x oz of gold. <Paragraph partly redacted for privacy reasons.> No bullion has been sold. All bullion holdings were acquired through commodity markets at market prices.

Financial reporting

26. Special purpose financial reports are prepared in accordance with the Australian Accounting Standards for both the company and discretionary trust as they are solely for the controlling individual's use.

27. The company's turnover is more than $100 million in the relevant income years. (This paragraph has been partly redacted for privacy concerns because it contained details about the company's turnover, value of assets, and number of employees) From ZZZZ financial year onwards the client will still produce financial statements as special purpose financial reports.

28. Financial statements for both the company and trust aren't audited as regulatory standards don't require this.

Accounting for cryptocurrency

29. If the TOFA rules don't apply to the company's arbitrage activities, it will present the cryptocurrency holdings in its financial statements as inventory in accordance with AASB 102 - Inventories.

30. The cryptocurrency trading stock is measured at the lower of cost and net realisable value. Cost of inventory is determined using the first-in-first-out basis and is net of any rebates and discounts received. Net realisable value is estimated using the most reliable evidence available at the reporting date and inventory is written down through an obsolescence provision if necessary.

31. If the TOFA rules don't extend to the trust's investing activities, it will present the cryptocurrency holdings in its financial statements as inventory in accordance with AASB 138 - Intangible Assets.

32. The cryptocurrency held on capital account is measured at cost less any accumulated amortisation and impairment*. The cost is determined by how much was paid to acquire the cryptocurrency assets less any brokerage/transaction costs.

* In most cases no amortisation is expected for cryptocurrencies.

Relevant legislative provisions

Income Tax Assessment Act 1997

Section 230-15

Section 230-20

Section 230-45

Section 230-50

Section 230-210

Section 230-350

Section 230-395

Section 230-450

Section 230-455

Section 230-460

Section 230-475

Section 230-530

Section 974-160

Section 995-1

A New Tax System (Goods and Services Tax) Act 1999

Section 195-1

Reasons for decision

In these reasons:

• legislative references (eg, section 230-45, Division 230) are in the Income Tax Assessment Act 1997
• 'TOFA rules' means the provisions in Division 230 (about the taxation of financial arrangements)
• 'arbitrage arrangements' mean the cryptocurrency transactions the company enters using a trading bot, swapping one or more type of cryptocurrency for other cryptocurrency
• 'cryptocurrency exchange transactions' mean the cryptocurrency transactions the company enters without a trading bot, to exchange one type of cryptocurrency for another (eg, exchange Coin A for Coin B) with the intention of profiting from short-term fluctuations
• 'cash exchange transactions' mean the cryptocurrency transactions the company enters without a trading bot, either to buy cryptocurrency with cash, or sell cryptocurrency for cash
• 'exchange transactions' mean both the cryptocurrency and cash exchange transactions taken together
• 'acquisition contracts' mean the transactions the company and the trust enters to acquire either cryptocurrency (for the trust) or bullion (for the company), with the intention of holding the acquired asset as a long-term investment.

Question 1

Will the TOFA rules apply to cryptocurrency transactions entered by the company using the arbitrage function?

Answer

No.

Question 2

Will the TOFA rules apply to cryptocurrency held by the company other than for trading under the arbitrage function?

Answer

No.

Question 3

Will the TOFA rules apply to cryptocurrency held by the discretionary trust?

Answer

No.

Question 4

Will the TOFA rules apply to gold and silver bullion held as investments on the company's balance sheet?

Answer

No.

Question 5

If the answer to any of Questions 1 through 4 is 'yes', will the realisation method be the most appropriate for determining TOFA gains and losses?

Answer

Not applicable because the answer to Questions 1 through 4 are 'no'.

Question 6

If the answer to Question 1 is 'yes', will the TOFA gain be the additional cryptocurrency generated as a result of the arbitrage function, with ordinary cryptocurrency disposals being sales revenue and ordinary cryptocurrency acquisitions being purchases?

Answer

Not applicable because the answer to Question 1 is 'no'.

Summary of our reasons (for all Questions)

33. This ruling is about whether certain arbitrage arrangements, exchange transactions, and acquisition contracts involving cryptocurrency and bullion are covered by the TOFA rules in Division 230.

34. An arrangement is potentially covered by the TOFA rules if it's a financial arrangement under section 230-45. (There are other ways an arrangement can be covered by TOFA, but section 230-45 is the most relevant for this ruling.)

35. You have a financial arrangement under section 230-45 if you have a cash settlable right to receive or obligation to provide a financial benefit unless you have another significant (or rather, 'not insignificant') right or obligation under the same arrangement which isn't cash settlable.

36. A right or obligation will be treated as being cash settlable if the financial benefit is convertible into money, has a highly liquid market, and one of your purposes for entering the arrangement is to convert it into money.

37. But short-term financial arrangements involving goods or property are excluded from the TOFA rules if they meet requirements in section 230-450. One of those requirements is that the arrangement isn't a derivative financial arrangement. Broadly, something is a derivative financial arrangement if its value changes according to changes in the value of some specified variable.

38. We'll summarise the relevant arrangements.

• Under the arbitrage arrangements, the company enters contracts that immediately exchange cryptocurrency types, trying to profit from differences in the relevant exchange rates.
• Under the cryptocurrency exchange transactions, the company trades one type of cryptocurrency for another, with the aim of generating a profit in the short-term.
• Under the cash exchange transactions, the company either buys cryptocurrency with cash, or sells cryptocurrency for cash.
• The company and the trust also acquire bullion or cryptocurrency as long-term investments.

39. We've ruled that all arrangements fall outside the scope of the TOFA rules.

40. The arbitrage arrangements are financial arrangements. The rights and obligations under the arbitrage arrangements are to give or receive cryptocurrency. Cryptocurrency is a financial benefit. The right or obligation is treated as being cash settlable because cryptocurrency is convertible into money, (usually) has a highly liquid market, and the company regularly (at least every few months) sells the starting coin for cash. Since the only rights and obligations involve cryptocurrency swaps, all rights and obligations under the arrangements are cash settlable.

41. However, the arbitrage arrangements are excluded from the TOFA rules. The arrangements meet all the conditions in section 230-450. The arrangements are completed immediately. Cryptocurrency is property. The arrangement isn't a derivative financial arrangement: delivery is immediate so the value doesn't fluctuate according to changes in some other variable.

42. The exchange transactions qualify as financial arrangements but are excluded from the TOFA rules for similar reasons to the arbitrage arrangements.

43. In contrast, the acquisition contracts for cryptocurrency and bullion aren't financial arrangements. The company and the trust have an obligation to pay money and a right to receive bullion or cryptocurrency.

The right to receive the cryptocurrency or bullion isn't cash settlable because their purpose is to hold the asset as a long-term investment (rather than convert it to cash in the short or medium term). The noncash settlable right (to receive cryptocurrency or bullion) is significant compared to the cash settlable obligation (to pay money). Therefore, the acquisition contracts aren't financial arrangements under section 230-45.

44. Skipping over some details which we address in the detailed explanation, it broadly follows that none of the arrangements addressed in this ruling are covered by the TOFA rules.

Detailed explanation (for all Questions)

Brief overview of the TOFA rules

45. Division 230 is about the tax consequences of gains and losses resulting from financial arrangements. The rules in that Division are known as the TOFA rules (taxation of financial arrangements).

46. If an arrangement is covered by the TOFA rules, they apply to assess gains and deduct losses from that arrangement. Section 230-15 includes gains from financial arrangements in assessable income and allows deductions for losses from financial arrangements. If Division 230 applies, then section 230-20 says the gain or loss won't be assessed or deducted again under either the TOFA rules or other provisions.

47. Arrangements fall within the scope of the TOFA rules if they qualify under any of three provisions.

• Section 230-45, which broadly applies to cash settlable financial arrangements.
• Section 230-50, which broadly applies to financial arrangements about equity interests.
• Section 230-530, which applies to foreign currency, non-equity shares, commodities, and some contracts about commodities.

48. Some arrangements are excluded from the TOFA rules. Two relevant exclusions are for short-term financial arrangements which meet conditions in:

• section 230-450 (where the arrangement is about acquiring or giving goods or other property), and
• section 230-455 (applying to certain entities).

49. If a financial arrangement is covered by the TOFA rules (and not excluded), there are several methods for calculating the gain or loss. If gains and losses are 'sufficiently certain' the accruals method applies. Otherwise, the realisation method applies by default. You can elect to apply other methods, including the fair value method and the election to rely on financial reports. To elect to use those methods, you must prepare financial reports and have them audited.

50. To find out if the TOFA rules apply, we need to decide whether:

• there are financial arrangements under section 230-45 (about cash settlable financial arrangements)
• there are financial arrangements under section 230-50 (about equity interests)
• section 230-530 applies to treat anything as being a financial arrangement
• the exceptions in sections 230-450 or 230-455 apply.

Step 1: are there financial arrangements under section 230-45?

To answer this question, we need to identify the rights or obligations under the arbitrage arrangements, exchange transactions, and acquisition contracts. These are broadly rights to receive or obligations to give cryptocurrency, bullion, or cash.

51. Section 230-45 is about cash settlable financial arrangements. Broadly, subsection 230-45(1) says you have a financial arrangement if you have a cash settlable right or obligation, unless there are also ('not insignificant') rights or obligations under the same arrangement which either aren't financial benefits or aren't cash settlable. Subsection 230-45(2) prescribes a list of seven circumstances in which a right or obligation will be treated as being cash settlable.

52. To apply section 230-45, we need to identify the rights or obligations under each arrangement and decide whether they are financial benefits and are cash settlable.

53. The relevant rights and obligations under the arbitrage arrangements are about giving and receiving cryptocurrency. The company enters a series of contracts where it gives one type of cryptocurrency and receives another type of cryptocurrency in exchange. Under the example given in the facts, the

company will enter three separate contracts: it will give Coin A and receive Coin B, give Coin B and receive Coin C, and give Coin C and receive Coin A.

54. The rights and obligations under the cryptocurrency exchange transactions are essentially the same as for the arbitrage arrangements. The company has rights to receive one type of cryptocurrency and obligations to give another type of cryptocurrency in exchange.

55. For the cash exchange transactions, the company has either:

• (when buying) rights to receive cryptocurrency and obligations to give cash, or
• (when selling) rights to receive cash and obligations to give cryptocurrency.

56. For the cryptocurrency and bullion investment arrangements, we've focused on acquisition contracts.

• Under the cryptocurrency acquisition contracts, the trust will give money and receive cryptocurrency in exchange.
• Under the bullion acquisition contracts, the company will give money and receive cryptocurrency in exchange.
• We don't think simply holding cryptocurrency or bullion as an investment is a financial arrangement under this section. Once the owner holds the relevant benefit and has paid for it there's no right to receive or obligation to provide anything else.

57. Having identified these rights and obligations, we'll determine which ones are cash settlable under subsection 230-45(2).

A right or obligation to give or receive a financial benefit is cash settlable if it fits any of seven circumstances listed in subsection 230-45(2).

58. Under subsection 230-45(2), a right or obligation (to receive or provide a financial benefit) is cash settlable if:

• the benefit is money or a money equivalent <paragraph (a)>
• you intend to satisfy the right or obligation by receiving or giving money or a money equivalent, or by starting or ceasing to have another financial arrangement <paragraphs (b) and (c)>
• you have a practice of satisfying similar rights or obligations in that way <paragraph (d)>
• you are able to satisfy the right or obligation in that way, and you haven't entered the arrangement for the purpose of receiving or delivering the financial benefit as part of your expected purchase, sale, or usage requirements <paragraph (g)>
• you deal with the right or obligation (or similar ones) to profit from short-term price fluctuations or a dealer's margin <paragraph (e)>
• you meet paragraph 230-45(2)(f), which (speaking loosely) includes arrangements you enter with a purpose of converting liquid financial benefits into cash.

59. Section 974-160 says 'financial benefit' means anything of economic value and includes property and services.

60. Cryptocurrency and bullion are both financial benefits. Cryptocurrency has economic value because cryptocurrency can be traded on cryptocurrency exchanges.[1] Bullion also has economic value because it can be traded in bullion markets.[2]

Neither cryptocurrency nor bullion are money or money equivalents, so paragraph 230-45(2)(a) only applies to the obligation to give money under the investment contracts.

61. First, we'll address paragraph 230-45(2)(a), about benefits that are money and money equivalents.

• All the rights and obligations under the arbitrage arrangements are about giving and receiving cryptocurrency rather than cash.
• The same is true of the cryptocurrency exchange transactions.
• A right to receive or obligation to give cryptocurrency would only be cash settlable under paragraph (a) if cryptocurrency is money (or a money equivalent).
• The company and the trust will have cash settlable rights or obligations when they enter the cash exchange transactions or acquisition contracts. They have an obligation to give cash when they buy the cryptocurrency or bullion, and a right to receive cash when selling cryptocurrency.
• In contrast, the obligation to receive cryptocurrency or bullion under the cash exchange transactions or acquisition contracts would only be cash settlable if cryptocurrency or bullion is money.
• Therefore, we need to determine whether cryptocurrency and bullion are money.

62. The ATO view is that cryptocurrency isn't money. TD 2014/25[3] discussed whether bitcoin was money while deciding whether it was 'foreign currency' for tax purposes. It cited statements in case law to the effect that money is a generally accepted medium of exchange for goods, services, and paying debts. It concluded that bitcoin's use and acceptance for payment wasn't sufficient for it to qualify as money. While we understand bitcoin was made legal tender in El Salvador in 2021,[4] TD 2014/25 hasn't been withdrawn and remains the ATO view. We think the same reasoning applies to other cryptocurrency types. Further, the ATO website says that for tax purposes, crypto assets (which include cryptocurrency) aren't a form of money.[5]

63. Applying the same test, bullion doesn't qualify as money either. While gold and silver bullion can be considered legal tender, in its ingot or bar form it's most often held as a reserve by central banks or held by investors to hedge against other items in their portfolio.[6] It isn't generally used or accepted in the community to pay for goods and services or settle debts. Bullion coins have a commemorative purpose and are generally treated as collectibles rather than used in transactions.[7] Whatever its form, bullion doesn't have the level of use or acceptance to qualify as money.

64. Neither cryptocurrency nor bullion is a money equivalent as defined in the TOFA rules.

• The definition of 'money equivalent' covers a right to receive money, a financial arrangement, or a right to receive something that's a financial arrangement under section 230-45.
• Cryptocurrency and bullion don't give the holder a right to receive money: in both cases, the holder would have to sell the asset to receive money.
• Cryptocurrency and bullion would only be a money equivalent if it was otherwise a financial arrangement or gave the holder a right to something else that qualified as a financial arrangement.
• While we conclude (at paragraph 78) that the right to receive or the obligation to give cryptocurrency under the arbitrage arrangements and exchange transactions is a financial arrangement, cryptocurrency taken as a stand-alone asset doesn't qualify as a financial arrangement.

65. Therefore, the rights to receive cryptocurrency or bullion, and the obligation to give cryptocurrency, aren't cash settlable under paragraph 230-45(2)(a).

There are no rights or obligations under the arbitrage arrangements, exchange transactions, or the acquisition contracts that are cash settlable under paragraphs 230-45(2)(b), (c), (d), (e), and (g).

66. The rights and obligations under the arbitrage arrangements don't qualify as being cash settlable under paragraphs 230-45(2)(b), (c), (d), (e), or (g).

• The company doesn't intend to settle the rights or obligations (to give or receive cryptocurrency) by receiving money (or a money equivalent or entering a financial arrangement) instead. Paragraphs (b) and (c) aren't met.
• Nor does the company have a practice of settling, or an ability to settle, those rights or obligations in that way. Paragraphs (d) and (g) aren't met.
• While the company deals with cryptocurrency to profit from short-term fluctuations, it doesn't deal with the rights to receive or the obligations to give cryptocurrency in that way. The arbitrage arrangements are agreements to exchange one cryptocurrency type for another, entered immediately. The company doesn't deal in its rights to receive or obligation to provide by selling those rights/obligations to other entities. Paragraph (e) isn't met.

67. The same reasoning applies to the exchange transactions. The company has rights to receive or give cryptocurrency under those transactions. It doesn't intend, or have a practice or ability, to receive or pay money instead of cryptocurrency. It buys or sells the cryptocurrency to profit from short-term fluctuations in the price of cryptocurrency, but it doesn't deal in the rights to receive or obligations to give cryptocurrency. Paragraphs (b), (c), (d), (e), and (g) aren't met.

68. The same is also true to the company's and the trust's rights to receive cryptocurrency or bullion under the acquisition contracts. They don't intend, or have a practice or ability, to receive money instead. They purchase the cryptocurrency or bullion to hold as a long-term investment. They don't deal with the right to receive the cryptocurrency or bullion to profit from price fluctuations.

The rights and obligations under the arbitrage arrangements and exchange transactions are cash settlable under paragraph 230-45(2)(f), but not the rights to receive cryptocurrency or bullion under the acquisition contracts.

69. Next, we'll address whether the rights or obligations under these arrangements (ignoring the obligation to give cash under the acquisition contracts) qualify as cash settlable under paragraph 230-45(2)(f).

70. Paragraph 230-45(2)(f) applies where you meet four conditions. First, none of paragraphs (a) to (e) apply. Second, the financial benefit is readily convertible into money or a money equivalent <paragraph (3)(a)>. Third, there's a market for the financial benefit that has a high degree of liquidity. Fourth, either:

• for the recipient of the financial benefit, the amount of money or money equivalent isn't subject to a substantial risk of substantial decrease in value, or
• one of your purposes for entering the arrangement is to receive or deliver the financial benefit to raise or provide finance, or so that it may be converted or liquidated into money or a money equivalent (other than for expected purchase, sale, or usage requirements).

We refer to these bullet points as the 'first limb' and 'second limb' of the fourth condition.

71. The first condition of paragraph 230-45(2)(f) is met because we've concluded that paragraphs (a) to (e) don't apply.

72. The second and third conditions are probably also met. Cryptocurrency and bullion are both readily convertible into money because they can both be traded on exchanges. Since it can be traded on exchanges, cryptocurrency would in many cases have a market with a high degree of liquidity. Some sources say this depends on the exchange, type of cryptocurrency, and current trading conditions.[8] Some sources regard gold and silver as liquid assets,[9] although others say gold and silver can be illiquid or have some liquidity risk.[10] We think gold and silver bullion would generally be classed as having a highly liquid market, but again, it may depend on trading conditions.

73. For the arbitrage arrangements, the first limb of the fourth condition isn't met. Some sources suggest cryptocurrency prices are volatile and are known to fluctuate.[11] For example, bitcoin's price has experienced many rapid rises and falls in its history.[12] Therefore, the amount of money for which the financial benefit could be converted into money most likely is subject to a substantial risk of a substantial decrease in value.

74. But the second limb of the fourth condition ismet. For the arbitrage arrangements, the company trades its starting coin from time to time for other cryptocurrencies or sells them for stablecoin, and then sells stablecoin to receive cash. The company's purpose doesn't seem to be to raise finance. But while the arbitrage profits may be held in a cryptocurrency form for some months, we think it's evident that the company enters the arbitrage arrangements with at least a medium-term intention to convert those profits into cash (as opposed to holding the cryptocurrency indefinitely as an investment). Therefore, one of the company's purposes is to receive the financial benefit to convert it into money, and that conversion won't be for expected purchase, sale, or usage requirements.

75. It follows that the rights and obligations under arbitrage arrangements qualify as being cash settlable because they meet all four conditions of paragraph 230-45(2)(e).

76. The fourth condition is also met for the exchange transactions. Since cryptocurrency is volatile, the financial benefit is subject to a substantial risk of a substantial reduction in value, so the first limb isn't met. But the second limb will be met. The company's purpose is either to acquire cryptocurrency to hold it for a short time before selling for cash, or immediately sell the cryptocurrency for cash. That purpose isn't for expected purchase, sale, or usage requirements.

77. But we don't think the fourth condition is met for the acquisition contracts. Bullion, like cryptocurrency, is volatile.[13] The first limb isn't met because both of those financial benefits are subject to a substantial risk of a substantial reduction in value. Further, the purpose for both the company and the trust purpose in entering the acquisition contracts is to acquire and hold the cryptocurrency or bullion as a long-term investment. They don't seem to be using those contracts to raise finance for some other acquisition or operation. While they may eventually sell the assets to convert them to cash, we think that's too indefinite and distant to be treated as one of the purposes for entering the acquisition contracts. Therefore, the second limb isn't met either. Since neither limb is met, the acquisition contracts don't meet the fourth condition.

78. This means that the rights and obligations under the arbitrage contracts and exchange transactions qualify as cash settlable under paragraph 230-45(2)(f), but not the rights to receive cryptocurrency or bullion under the acquisition contracts.

All rights and obligations under the arbitrage arrangements and exchange transactions are cash settlable, but under the acquisition contracts, only the obligation to pay money is cash settlable.

79. We'll summarise our decisions about which rights and obligations are cash settlable.

• For the arbitrage contracts and exchange transactions, both the right to receive and the obligation to give cryptocurrency are cash settlable under paragraph 230-45(2)(f).
• For the acquisition contracts, the obligation to give money is cash settlable under paragraph 23045(2)(a). But the right to receive cryptocurrency or bullion under those acquisition contracts isn't cash settlable under any paragraph in subsection 230-45(2). Paragraph 230-45(2)(f) doesn't apply because the company and the trust will hold the cryptocurrency or bullion as a long-term investment.

The arbitrage arrangements and exchange transactions qualify as financial arrangements under section 230-45, but the acquisition contracts don't.

80. Now that we've identified the rights and obligations, and determined which ones are cash settlable, we can apply subsection 230-45(1).

81. To repeat, subsection 230-45(1) says you have a financial arrangement if you have a cash settlable right or obligation, unless there are also significant (or rather, 'not insignificant') rights or obligations under the same arrangement which aren't cash settlable.

82. The arbitrage arrangements and exchange transactions meet that test. We concluded at paragraph 78 that the company's rights to receive and obligations to give cryptocurrency under the arbitrage arrangements are cash settlable because they meet paragraph 230-45(2)(f). We reached the same conclusion for the exchange transactions. Since all rights and obligations are cash settlable, the arbitrage arrangements and exchange transactions are financial arrangements under subsection 23045(1).

83. In contrast, the acquisition contracts aren't financial arrangements under this test. The company and the trust have obligations to give money to acquire either cryptocurrency or bullion, and those obligations are cash settlable. But we concluded at paragraph 78 that the right to receive cryptocurrency or bullion under those acquisition contracts aren't cash settlable. Since all the buyer's rights are non-cash settlable, we think those rights are significant when compared to the cash-settlable obligations. This means that the proviso applies, so the acquisition contracts fail the test in subsection 230-45(1).

Step 2: are there financial arrangements under section 230-50?

None of the arrangements in this ruling are financial arrangements under section 230-50: broadly, they aren't equity interests, or rights or obligations about equity interests.

84. Next, we address whether the arrangements in this ruling could be financial arrangements under section 230-50.

85. Very broadly, financial arrangements under section 230-50 are about equity interests.

• Subsection 230-50(1) says you have a financial arrangement if you have an equity interest. If you do, the equity interest constitutes the financial arrangement.
• Subsection 230-50(2) says you also have a financial arrangement if you have a legal or equitable right to receive or obligation to provide something that's a financial arrangement under this section, or a combination of those rights or obligations, and it doesn't constitute or form part of a financial arrangement under subsection 230-45(1).
• Subsection 230-45(2) would seem to cover rights to receive or obligations to provide equity interests, since an equity interest would be a financial arrangement under subsection 230-50(1).

86. Equity interests are broadly ownership rights in other entities. Section 995-1 says 'equity interest' has the meaning given by Subdivision 974-C for companies, and section 820-930 for trusts or partnerships. Speaking loosely, you have an equity interest under those provisions if you:

• are a member or stockholder in a company, a beneficiary of a trust, or a partner in a partnership
• have an interest which carries a right to a return from the entity, and either the right, or the amount of the return, is contingent on the entity's economic performance, or is at the entity's discretion
• have a right to be issued with, or a right that may convert into, something else that's an equity interest.

87. The rule in section 230-50 doesn't apply. The arbitrage arrangements are about giving and receiving cryptocurrency. The exchange transactions and acquisition contracts are about giving money and receiving cryptocurrency or bullion, or giving cryptocurrency and receiving cash. Neither those rights or obligations, nor the underlying cryptocurrency or bullion assets, give anyone equity interests in companies, trusts, or partnerships. It follows that they aren't financial arrangements under section 23050.

Step 3: does section 230-530 apply to treat anything as being a financial arrangement?

88. Next, we address whether the acquisition contracts could be financial arrangements under section 230530.

89. Broadly, section 230-530 treats four things as if they were financial arrangements for TOFA purposes:

1. foreign currency
2. non-equity shares
3. commodities held by traders
4. offsetting commodity contracts held by traders.

Subsection 230-530(1) doesn't apply: neither cryptocurrency nor bullion are foreign currency for tax purposes.

90. Subsection 230-530(1) says Division 230 also applies to foreign currency as if the currency were a right that constituted a financial arrangement.

91. Section 995-1 says foreign currency means a currency other than Australian currency, digital currency, or anything prescribed by the regulations.

92. Digital currency has the same meaning as in the GST Act[14] . It means digital units that:

• are designed to be fungible
• can be provided as consideration for a supply
• are generally available to the members of the public without any substantial restrictions on their use as consideration
• either aren't denominated in any country's currency, or are denominated in currency that isn't issued by (or under the authority of) a government agency
• don't have a value depending on or derived from anything else
• don't give an entitlement to receive or direct supply of anything (except incidental to holding units of value or using it as consideration).

But digital currency doesn't include a thing that if supplied, would be a financial supply for a reason other than being a supply of digital units of value (which meet the rest of the definition) or money.

93. The ATO view is that bitcoin isn't foreign currency. TD 2014/25 at paragraphs 31 and 32 says:

• 'Australian currency' means the monetary unit established under Australian law to discharge

monetary obligations

• 'foreign currency' means a currency legally recognised under the laws of another country as the monetary unit to discharge monetary obligations for all transactions and payments in that country.

TD 2014/25 concluded (at paragraph 33) that bitcoin wasn't foreign currency because it wasn't a monetary unit recognised and adopted by the laws of any sovereign state as a monetary unit and means of discharging monetary obligations for all transactions and payments.

94. We think that other forms of cryptocurrency wouldn't qualify as money or foreign currency for similar reasons to the ATO's view in TD 2014/25.

95. Absent the exclusion for digital currency, it could be suggested that one form of cryptocurrency, bitcoin, is a foreign currency today because it has been recognised as legal tender in El Salvador.[15]

96. However, we think that bitcoin qualifies as digital currency under the GST Act because it meets the conditions we listed at paragraph 92.

• Bitcoin is fungible because one coin is equal to other coins of the same type.
• It can be provided as consideration for a supply because at least some businesses accept it for payment for goods or services.[16]
• It's generally available to the public and its use isn't restricted (at least in most countries).[17]
• While arguably bitcoin is currency in El Salvador, it isn't issued under by (or under the authority of) any government agency, whether in El Salvador or elsewhere.
• Its value isn't pinned to something else.
• It doesn't entitle the holder to receive anything, and it isn't a supply of anything other than units of digital value.

97. Whether other cryptocurrency types qualify as digital currency would depend on their characteristics. Cryptocurrency with characteristics resembling bitcoin may qualify. However, stablecoin may not meet the definition as their value is pinned to something else, such as a currency or commodity price.[18] Similarly, we expect that non-fungible tokens, as unique items, would fail the 'fungible' criterion.¹⁹

98. It follows that cryptocurrency isn't foreign currency. Bitcoin is excluded from being foreign currency because it's digital currency. We don't need to determine whether other types of cryptocurrency could also qualify as digital currency. Apart from bitcoin, no cryptocurrency types would qualify as 'currency' because they aren't recognised as a monetary unit under the laws of any country.

99. Bullion wouldn't be foreign currency either. It isn't a monetary unit accepted under the laws of a foreign country to discharge monetary obligations. As discussed at paragraph 63, bullion might sometimes be legal tender but isn't generally used or accepted as payment.

100. We conclude that the acquisition contracts wouldn't be financial arrangements under subsection 230530(1). The relevant contracts are about acquiring cryptocurrency and bullion. We've concluded that cryptocurrency and bullion aren't foreign currency. Therefore, subsection 230-530(1) doesn't apply to treat the cryptocurrency or bullion acquired under those contracts as if it were a right which was a financial arrangement.

Subsection 230-530(2) isn't relevant: there aren't any non-equity shares in these arrangements.

101. Subsection 230-530(2) says Division 230 also applies to a *non-equity share in a company as if the share were a right that constituted a *financial arrangement.

102. Section 995-1 says:

• 'non-equity share' means a share that isn't an equity interest in the company share in a company means a share in the capital of the company, and includes stock.

103. We discussed the meaning of 'equity interest' at paragraph 86.

104. Subsection 230-530(2) isn't relevant to the arrangements covered by this ruling. Those arrangements involve rights to receive cryptocurrency or bullion. Those rights don't give the holder any share in the capital of a company.

The rules in subsections 230-530(3) and (4) applying to commodity traders aren't relevant because the company and the trust can't make a fair value election.

105. Section 230-530 also treats certain commodity arrangements as if they were financial arrangements. Subsection 230-530(3) says Division 230 also applies to a commodity you hold as if the commodity were a right that constituted a financial arrangement if several listed conditions are met. Subsection 230-530(4) says Division 230 also applies to a contract to which you are a party as if the contract were a financial arrangement, again, if several listed conditions are met (some of which are about commodities).

106. A common condition to both subsections 230-530(3) and (4) is that a fair value election or an election to rely on financial reports applies to the arrangements.

107. To make a fair value election or an election to rely on financial reports, you need to produce financial reports that comply with accounting principles and have them audited in accordance with auditing principles. See subsection 230-210(2) for fair value elections, and subsection 230-395(2) for the election to rely on financial reports.

108. The rules about commodities don't apply to this ruling. The company and the trust only produce special purpose financial reports: they don't prepare financial reports which comply with accounting principles or have them audited. They aren't eligible to make a fair value election or an election to rely on financial reports, so they don't meet one of the conditions for subsections 230-530(3) or (4) to apply. We don't need to decide whether cryptocurrency and bullion would be treated as 'commodities' for section 230530 purposes.

The extended application rules in section 230-530 don't apply.

109. The extended application rules in section 230-530 (for foreign currency, non-share equity interests, and commodity trading) don't apply to treat the acquisition contracts as financial arrangements.

Conclusion on Steps 1, 2, and 3

The arbitrage arrangements are financial arrangements, but the acquisition contracts aren't.

110. We'll summarise our conclusions about whether the relevant arrangements are financial arrangements for TOFA purposes.

• We concluded at paragraphs 83, 87, and 109 that the acquisition contracts won't be treated as financial arrangements under sections 230-45, 230-50, or 230-530.
• It follows that TOFA won't apply to the acquisition contracts.
• We concluded at paragraph 82 that the arbitrage arrangements and exchange transactions are treated as financial arrangements under section 230-45.
• Therefore, TOFA will apply to the arbitrage arrangements and exchange transactions unless an exception applies.

Step 4: do the exceptions in sections 230-450 or 230-455 apply?

111. We need to determine whether an exception applies to take the arbitrage arrangements outside the scope of the TOFA rules.

112. There are many exceptions. Two that seem relevant are about short-term arrangements about goods or property (in section 230-450) or entered by entities covered by section 230-455. There are other exclusions in sections 230-460 and 230-475, but none appear to be relevant on these facts.

Section 230-450 applies to the arbitrage arrangements and exchange transactions, so they're excluded from the TOFA rules.

113. The first exception (in section 230-450) excludes short-term arrangements about goods or property from the TOFA rules where five conditions are met. We'll list them.

1. The financial arrangement is a financial arrangement under section 230-45.
2. Under the arrangement, you either acquired (or provided) goods, property, or services from (or to) another entity, and you provided or received financial benefits as consideration. (The goods, property, or services can't be money, or a money equivalent.)
3. The period between the time when you provided or received the consideration, and the time when you acquired or provided the property, goods or services, isn't more than 12 months.
4. The arrangement isn't a derivative financial arrangement.
5. A fair value election doesn't apply to the arrangement.

114. Where those conditions are met, section 230-450 says Division 230 doesn't apply in relation to your gains and losses from the financial arrangement.

115. Three of those conditions are clearly met. We concluded at paragraph 82 that the arbitrage arrangements and exchange transactions are financial arrangements under section 230-45, so paragraph (a) is met. The cryptocurrency given and received under the arbitrage arrangements is delivered immediately, so paragraph (c) is met. Paragraph (e) is also met: the company isn't eligible to make a fair value election because it doesn't have its financial reports audited.

116. Whether the condition in paragraph (b) is met turns on whether cryptocurrency is property or money, because the only thing being acquired and provided under the arbitrage arrangements is cryptocurrency.

117. The ATO view is that bitcoin is property and isn't money. TD 2014/26[20] (at paragraphs 6 through 12) says that characteristics of proprietary rights include whether a right is definable, identifiable, capable of being assumed by third parties, is permanent or stable, is excludable, has commercial value, and is enforceable against third parties. The TD concludes that bitcoin is property because it has at least some of these characteristics: the rights associated with bitcoin are definable, identifiable, valuable, transferable, capable of being assumed by third parties, stable to some degree, and excludable. As we mentioned at paragraph 61, the ATO view (expressed in TD 2014/25 at paragraph 24) is that bitcoin isn't money.

118. We think the same is true of other cryptocurrencies: they are property and not money. Cryptocurrencies traded on exchanges would be property following the approach in TD 2014/26: they give the holder rights which are identifiable, have value, are transferable, and the holder can exclude others from accessing them. The ATO website also says that crypto assets (which include cryptocurrencies) aren't treated as money for tax purposes.[21]

119. Paragraph (b) is therefore met. Under the arbitrage arrangements, the company gives cryptocurrency in exchange for other cryptocurrency. Under the exchange transactions, The company gives or receives cryptocurrency in exchange either for other cryptocurrency or cash. Cryptocurrency is property and isn't money. We concluded at paragraph 64 that it isn't a money equivalent, and at paragraph 60 that it's a financial benefit. Therefore, under the arbitrage arrangements, the company is both giving and receiving property (which isn't money or a money equivalent) as consideration for giving and receiving financial benefits. Under the exchange transactions, the company is giving or receiving property (cryptocurrency) as consideration for financial benefits (either cash or other cryptocurrency). The condition in paragraph (b) is met in both cases.

120. This leaves the condition in paragraph (d): the arrangement mustn't be a derivative financial arrangement.

121. Derivative financial arrangements are broadly about arrangements which change in value according to some variable. Section 230-350 says a derivative financial arrangement is a financial arrangement that you have where:

• its value changes in response to changes in a specified variable or variables, and
• there is no requirement for a net investment, or there is such a requirement but the net investment is smaller than would be required for other types of financial arrangement that would be expected to have a similar response to changes in market factors.

A note to the section says a 'specified variable' includes an interest rate, foreign exchange rate, credit rating, index, or a commodity or financial instrument price.

122. The explanatory memorandum[22] to the bill which introduced the TOFA rules suggests that the definition of 'derivative financial instruments' resembles that used in accounting standards, and examples of derivative financial instruments include swaps,[23] options, futures,[24] and forward contracts.[25]

123. We don't think the arbitrage arrangements qualify as a derivative financial arrangement. The agreements are entered immediately. The conversion rates from one cryptocurrency to another would be set using the cryptocurrency exchange prices applying when the contract is entered, and delivery is immediate. The value of the financial arrangement can't change based on future changes in the exchange rates because it has already been completed. The arbitrage arrangements aren't swaps (as that term is understood in finance contexts), options, forward contracts, or futures contracts, and they don't resemble or have a similar function to those things.

124. The same is true for the exchange transactions. The company is either receiving or selling cryptocurrency with immediate delivery. Prices are set by the exchange prices which apply at the transaction time, so the value of the financial arrangements can't change. They don't resemble swap, options, forward contracts, or futures contracts.

125. It follows that the exception for short-term arrangements involving property applies. All conditions in section 230-450 are met. Section 230-450 applies to the arbitrage arrangements and exchange transactions to exclude them from the TOFA rules.

Section 230-455 doesn't apply because the company exceed the threshold.

126. We'll briefly address the exception in section 230-455.

127. Section 230-455 applies to short-term arrangements applying to particular entity classes. Subsection 230-455(1) says Division 230 doesn't apply to gains or losses from a financial arrangement if you meet listed conditions. First, you need to fall within any of four listed entity types. Second, depending on your entity type, you may need to meet extra conditions about turnover and asset value. Third, the arrangement either won't end more than 12 months after you start to have it, or the arrangement isn't a qualifying security.

128. The four listed entity types (speaking loosely) are individuals, superannuation funds, ADIs (authorised deposit-taking institutions), and other entities.

129. Subsection 230-455(4) details the extra requirements which apply to other entity types. Speaking loosely, your:

• aggregated turnover (for the current or immediately preceding year) must be less than $100million
• financial assets must be valued at less than $100 million (worked out at the end of the current or preceding income year)
• total assets must be valued at less than $300 million (again, worked out at the end of the current or preceding income year).

130. The company doesn't qualify for the exception in section 230-455. It's a company, not an individual, a superannuation fund, or an ADI. It doesn't meet the conditions applying to other entity types because its aggregated turnover is more than $100 million.

Treatment of gains and losses under the TOFA rules

131. We've concluded that none of the arrangements in this ruling are covered by the TOFA rules, so we don't need to determine the correct method for working out gains and losses from those arrangements.

Conclusion

The TOFA rules don't apply to any of the arrangements in this ruling.

132. The TOFA rules in Division 230 don't apply to any of the arrangements in this ruling scheme.

• The TOFA rules apply to arrangements that are financial arrangements under either sections 23045, 230-50, or 230-530, unless they're excluded by a specific provision.
• The arbitrage arrangements and exchange transactions are financial arrangements under section 230-45 because all rights and obligations are cash settlable.
• However, the exception in section 230-450 applies to exclude the arbitrage arrangements and exchange transactions from the TOFA rules.
• The cryptocurrency and bullion acquisition contracts aren't financial arrangements under section 230-45, because the right to receive cryptocurrency or bullion is non-cash settlable and is significant compared to the cash-settlable obligation under the same contract.
• The cryptocurrency and bullion acquisition contracts aren't financial arrangements under either section 230-50 or section 230-530.
• It follows that the TOFA rules don't apply to the arbitrage arrangements or the acquisition contracts.

[1] Investopedia (2023) Cryptocurrency Exchanges: What They Are and How to Choose (investopedia.com) accessed on 12 February 2024.

[2] Investopedia (2022) Bullion: What It Is, How It's Used, and Ways To Invest in It (investopedia.com) accessed on 8 February 2024.

[3] Taxation Determination TD 2014/25 Income tax: is bitcoin a 'foreign currency' for the purposes of Division 775 of the Income Tax Assessment Act 1997?

[4] El Salvador Accepts Bitcoin as Legal Tender (investopedia.com) updated 7 September 2021 accessed 17 January 2024; National Bureau of Economic Research (2022) El Salvador's Experiment with Bitcoin as Legal Tender | NBER (summary of Working Paper 29968 by Alvarez, F. Argente, D. Van Patten, D) accessed 7 February 2024.

[5] ATO (2023) What are crypto assets? | Australian Taxation Office (ato.gov.au) accessed 16 February 2024.

[6] Investopedia (2022) Bullion: What It Is, How It's Used, and Ways To Invest in It (investopedia.com) updated 27 April 2022, accessed 8 January 2024; The Royal Mint (2023) What is Gold Bullion? | The Royal Mint , accessed 8 February.

[7] The US Mint (2022) Bullion Coin Programs | Gold, Silver, Platinum and Palladium | U.S. Mint (usmint.gov), accessed 8 February 2024; The Royal Australian Mint (2023) Commemorative Coins | Royal Australian Mint (ramint.gov.au), accessed 8 February 2024; The Perth Mint (2023) What are non-circulating legal tender coins? (perthmint.com) accessed 8 February 2024.

[8] See Investopedia (2023) Liquidity of Bitcoin (investopedia.com) accessed 8 January 2024; Investopedia (2023) Gold vs. Bitcoin: Which Is Better? (investopedia.com) accessed 12 February 2024; Bitcoin.com 'what is liquidity' accessed 12 February 2024; Loi, H (2018) 'The Liquidity of Bitcoin', International Journal of Economics and Finance, vol. 10, no. 1.

[9] See CBS News (2023) Why gold is a liquid asset (and what that means for investors) - CBS News accessed 12 February 2024; The Perth Mint (2023) Key factors to consider before investing in silver (perthmint.com) accessed 12 February 2024; The Royal Mint Gold vs Crypto | The Royal Mint accessed 12 February 2024; Investopedia (2023) The Most Affordable Way to Buy Gold: Physical Gold or ETFs? (investopedia.com) accessed 8 January 2024.

[10] See Forbes (2021) How To Reduce Risk When Investing In Precious Metals (forbes.com) accessed 12 February 2024; Investopedia (2023) Precious Metals Investing Guide for Beginners (investopedia.com) accessed 8 January 2024.

[11] For example, Reserve Bank of Australia (2019) Cryptocurrency: Ten Years On | Bulletin - June 2019 | RBA accessed 14 February 2024; Harvard Business Review (2022) What Skeptics Get Wrong About Crypto's Volatility (hbr.org) accessed 14 February 2022; Investopedia (2024) Why Is Bitcoin Volatile? (investopedia.com) accessed 14 February 2022.

[12] Investopedia (2023) Bitcoin's Price History (investopedia.com) accessed 14 February 2022; Harvard Business Review (2022) What Skeptics Get Wrong About Crypto's Volatility (hbr.org) accessed 14 February 2022.

[13] Investopedia (2023) Precious Metals Investing Guide for Beginners (investopedia.com) accessed 14 February 2024; Commodity Futures Trading Commission Article: Gold Is No Safe Investment | CFTC ccessed 14 February 2024.

[14] See section 995-1 (of the Income Tax Assessment Act 1997), which refers to section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999.

[15] See the Explanatory Memorandum (House of Representatives) to the Treasury Laws Amendment (2022 Measures No. 4) Bill 2022 at paragraphs 2.1 through 2.5.

[16] See Zippia (2022) How Many Businesses Accept Bitcoin? [2023]: 21 Important Bitcoin Statistics - Zippia accessed at Statistica (2021) Companies accepting Bitcoin by country | Statista accessed at https://www.statista.com, both accessed on 7 February 2024.

[17] According to Investopedia, cryptocurrency can be used for transactions in many countries, but are banned in some, including China and Saudi Arabia. See Investopedia (2023) Countries Where Bitcoin Is Legal and Illegal (investopedia.com) both accessed 16 February 2024.

[18] See Investopedia (July 2023) Stablecoins: Definition, How They Work, and Types (investopedia.com) accessed 6 July 2023.

[19] See Investopedia Non-Fungible Token (NFT): What It Means and How It Works (investopedia.com)

[20] Taxation Determination TD 2014/26 Income tax: is bitcoin a 'CGT asset' for the purposes of subsection 108-5(1) of the Income Tax Assessment Act 1997?

[21] ATO (2023) What are crypto assets? | Australian Taxation Office (ato.gov.au) accessed 16 February 2024.

[22] Explanatory Memorandum to the Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2008, at paragraphs 8.408.44.

[23] Investopedia says a 'swap' is a derivative contract where one party exchanges or swaps the values or cash flows of one asset for another. One value is fixed and the other is variable, based on an index price, interest rate, or currency exchange rate. Investopedia (2023) What Are Swaps? (investopedia.com) accessed 9 February 2024.

[24] Investopedia says futures are derivative financial contracts that oblige parties to buy or sell an asset at a predetermined future date and price, regardless of the current market price. They allow the investor to speculate on the price or hedge price movements to prevent losses. Investopedia (2023) Futures in Stock Market: Definition, Example, and How to Trade accessed 9 February 2024.

[25] Forward contracts resemble futures contracts, except that forward contracts are negotiated privately while futures are a standardised contract traded on a stock exchange. Investopedia (2023) Forward Contracts vs. Futures Contracts: What's the Difference? (investopedia.com) accessed 9 February 2024.