How Are Hard Forks Taxed?

No Income Tax Upon Receipt

• Receiving new coins from a hard fork is not a taxable event. 
• You do not pay Income tax nor realise a capital gain at the moment you receive the new coins. 
• The cost base (the original value for tax purposes) of the new coins is considered zero.

Capital Gains Tax (CGT) Applies on Disposal

• Tax is only tirggered when you dispose of the new coins, such as by selling, swapping, or spending them. 
• Since the cost base is zero, the entire proceeds from the sale are treated as a capital gain.
• The gain must be reported in your annual tax return under the capital gains section. 

CGT Discount for Long-Term Holding

• If you hold the new coins for more than 12 months before disposal, you may be eligible for the 50% CGT discount. 
• This means only half of the capital gains is subject to tax, which can significantly reduce your tax liability. 

Record-Keeping Requirements

• The ATO requires details records of all cryptocurrency transactions, including those involving hard forks. 
• Records should include dates, amounts, the nature of the transaction, and the wallet addresses involved. 

Example: Tax on Hard Forks in Practice. 

Supporse you held 1 Bitcoin (BTC) at the time of the Bitcoin Cash (BCH) hard fork and received 1 BCH:

• At receipt: No tax is due. The cost base for your BCH is $0.
• When you sell your BCH: If you sell it for $2,000 is considered a captial gain and is taxable. 
• If you held the BCH for over a year: You may claim the 50% CGT discount, amking only $1,000 subject to tax. 

Special Considerations

• Traders vs. Investors: If you are classified as a trader (operating business), different rules may apply, and you should consult a tax professional. 
• Airdrops vs. Hard Forks: The tax treatment for airdrops is different; airdrops are generally taxed as income unless they are initial allocations.