ATO draft rulings on airdrops and wrapped tokens

On 19 August 2026 the ATO published two draft rulings that change how a lot of everyday crypto activity looks at tax time. One deals with airdrops. The other deals with wrapping a token, like swapping ETH for WETH. Both are open for public comment, and both matter for Australian investors.

The short version, on the ATO's draft view: airdrops received by ordinary investors are generally not income when they land in your wallet, and a brand new token with no market yet will often carry a nil cost base. Wrapping and unwrapping, on the other hand, are treated as CGT events on the draft view, even though nothing was sold and no counterparty was involved.

Here is what each draft says, what it means in practice, and what is still uncertain.

The two drafts at a glance

• TR 2026/D1, Income tax: receipt and disposal of crypto assets by an airdrop. Comments close 2 October 2026.
• TD 2026/D2, Income tax: capital gains tax consequences of using a smart contract to wrap and unwrap crypto assets. Comments close 18 September 2026.

Both are drafts, not final law. They set out the Commissioner's preliminary view. If you rely on a draft reasonably and in good faith and it later turns out to be wrong, you will not be charged interest or penalties on the matters it covers, but you will still owe the correct amount of tax.

Airdrops: usually not income on receipt

TR 2026/D1 draws a line based on why you received the tokens, not on the fact that you received them.

If you are an ordinary investor holding crypto on capital account, and the airdrop was not a reward for services and not part of an income producing activity, the ATO's draft view is that you do not include its market value in your assessable income when it arrives (paragraph 16). The airdropped token is treated as a separate CGT asset from whatever holding made you eligible for it, and tax comes later, when you dispose of it.

That is a meaningful clarification. It means the tokens appearing unannounced in your wallet are not, by themselves, a tax bill.

The picture changes if:

• You carry on a business of crypto asset trading. The market value goes into your assessable income as ordinary income, even if the tokens were unsolicited or a windfall (paragraph 13).
• You received the tokens for goods or services. Think a bounty airdrop for promoting a project. The money value is assessable income (paragraph 14).
• It came from a hobby. Not assessable, and you cannot deduct the costs of the hobby either (paragraph 21).

The nil cost base catch

The part worth reading closely is how the draft values what you received. The market value substitution rule sets the cost base of an airdropped token. Where the token is already trading and has an observable market value, that value becomes your cost base. Where the token is newly minted for the airdrop and has no or negligible market value at the moment you receive it, the cost base is generally nil (paragraph 87).

A nil cost base means that when you eventually sell, the entire proceeds are a capital gain. Nothing is taxed on receipt, but nothing is sheltered on exit either.

There is also a timing wrinkle worth noting. When the final ruling issues, it is proposed to apply both before and after its date of issue, with one exception: for initial allocation airdrops, being the first distribution of a token that had no prior trading, it will only apply to airdrops occurring after the final ruling is issued (paragraph 66).

We have gone through the examples, the exclusions and the record keeping in detail in our full breakdown of the ATO's draft ruling on airdrops.

Wrapping: a CGT event, in both directions

TD 2026/D2 is the one likely to surprise people. It deals with lock and mint wrapping contracts, using ETH and WETH as the worked example.

The ATO's draft position is that when you send ETH to a wrapping contract, your ownership of that ETH ends by abandonment, because your private key no longer lets you transfer, use or deal with it. That triggers CGT event C2 at the moment the ETH is sent (paragraph 9). The WETH you receive is a separate CGT asset, with a cost base equal to the market value of the ETH at the time it was sent (paragraphs 12 and 13).

Unwrapping is a second CGT event C2, happening when the WETH is burnt (paragraphs 17 and 18). The ETH you get back is a new asset, not a revival of the original (paragraph 34).

The ATO's own example makes the effect concrete. Finella buys 5 ETH for $10,000 in 2021. Four years later she wraps them when they are worth $30,000, so she can use a DeFi protocol. Wrapping crystallises a $20,000 capital gain, even though she has not cashed out a cent and still holds the same economic exposure.

Unlike the airdrop ruling, TD 2026/D2 is proposed to apply both before and after its date of issue (paragraph 22), with no carve out. Wraps and unwraps already sitting in your transaction history are in scope.

We have covered the mechanics, the alternative views the ATO considered and rejected, and what it means for the CGT discount, in our full breakdown of the ATO's draft determination on wrapping crypto.

What these drafts do not cover

The scope limits matter as much as the positions, and they are easy to read past.

TR 2026/D1 does not apply where you paid fiat or other crypto to receive the token, to airdrops received as a reward for providing liquidity to a decentralised exchange, to non arm's length arrangements, or to tokens with a rebasing mechanism (paragraph 9). GST is not considered at all (paragraph 7).

TD 2026/D2 applies only to wrapping contracts programmed as the lock, mint, burn and release sequence it describes. It expressly does not apply to transactions where crypto assets are sent to custodian counterparties (paragraph 3), and it does not deal with the position of anyone whose wrapping happens in the ordinary course of a business or as part of a profit making scheme (paragraph 5).

So liquidity pool tokens, staking derivatives, custodial wrapped assets like many bridged tokens, and rebasing tokens are not settled by either draft. If your activity sits in one of those buckets, these rulings do not give you an answer yet.

What to do now

• Check whether your history contains wraps. Because TD 2026/D2 is proposed to apply retrospectively, past ETH to WETH transactions are the practical exposure. On the draft view each wrap and unwrap is a separate CGT event, to be calculated and reported.
• Separate your airdrops by reason. Tokens received for promotional tasks or in the course of a trading business are treated differently from tokens that simply appeared. Being able to show which is which is the difference between an income entry and a capital account entry.
• Record the market value at the moment of receipt. The draft uses that value to set the cost base, so a nil or negligible value at receipt is what separates a sheltered gain from a fully taxable one later.
• Keep your records. The ATO generally expects crypto records to be kept for five years, including dates, Australian dollar values at the time, and what each transaction was for.

How Summ handles this

Summ identifies and categorises airdrop, wrap and unwrap transactions as they import, and applies market value at the time of each event, so these are surfaced in your history rather than left for you to find by hand.

If you want to see where you stand, connect your exchanges and wallets and generate a report for the financial year you need. Our Australian Crypto Tax Guide covers the fundamentals, and our guide to disposing of crypto explains how CGT events are calculated.

This article is general information only. It summarises what the ATO's draft documents say and is not tax, financial or legal advice, does not take your circumstances into account, and should not be relied on to work out your own position. TR 2026/D1 and TD 2026/D2 are drafts and may change before they are finalised. Consider your own circumstances and consult a registered tax professional if you're unsure.