Quick answer
Blockchain forks create new coins for holders — and complex tax consequences that depend on whether the fork was soft or hard.
DeFi & Web3
Australia
United Kingdom
United States
Blockchain Forking
When a blockchain diverges into two chains; the tax treatment of resulting coins varies by jurisdiction.
AustraliaUnited KingdomUnited StatesUnderstanding Blockchain Forking on crypto
Blockchain forking refers to the divergence of a blockchain's protocol into two separate paths. A soft fork is backward-compatible and does not create a new coin. A hard fork is not backward-compatible and typically results in a new chain and a new coin distributed to holders of the original. The tax implications primarily arise from hard forks, where holders receive new tokens. Tax treatment varies: the US treats fork tokens as income at fair market value on receipt; the UK may treat them as a new acquisition at zero cost; Australia treats them as income. The same fork event can have materially different tax consequences depending on where the holder is resident.
Blockchain forking refers to the divergence of a blockchain's protocol into two separate paths. A soft fork is backward-compatible and does not create a new coin. A hard fork is not backward-compatible and typically results in a new chain and a new coin distributed to holders of the original. The tax implications primarily arise from hard forks, where holders receive new tokens. Tax treatment varies: the US treats fork tokens as income at fair market value on receipt; the UK may treat them as a new acquisition at zero cost; Australia treats them as income. The same fork event can have materially different tax consequences depending on where the holder is resident.
What this means for your crypto activity
Hard forks create income
Hard forks create new tokens in your wallet — these are typically taxable income in the US and Australia.
Soft forks no new coins
Soft forks do not create new coins and generally have no direct tax consequences.
Deferred if inaccessible
If you cannot access or control the forked tokens (e.g. exchange does not support them), the income event may be deferred.
Original cost basis unchanged
The cost basis in your original token is not affected by a fork — only the new forked token creates a new cost basis.
Selling below receipt value
Selling the forked token below its income value at receipt creates a capital loss.
- Hard forks create new tokens in your wallet — these are typically taxable income in the US and Australia.
- Soft forks do not create new coins and generally have no direct tax consequences.
- If you cannot access or control the forked tokens (e.g. exchange does not support them), the income event may be deferred.
- The cost basis in your original token is not affected by a fork — only the new forked token creates a new cost basis.
- Selling the forked token below its income value at receipt creates a capital loss.
Seeing it in action
Example scenario
During the Ethereum Classic fork, ETH holders received ETC. The tax treatment depends on jurisdiction: a US holder reports the ETC as ordinary income at the first tradeable price; a UK holder may report zero income (zero cost base, any future gain fully taxable on disposal). Same economic event, different tax outcomes.
How this works across jurisdictions
- Australia
ATO treats fork token receipts as ordinary income at FMV on receipt; CGT applies on disposal.
- United Kingdom
HMRC treats forked tokens as a new acquisition; if no market value at fork date, cost basis may be nil.
- United States
Hard fork tokens are ordinary income at FMV when received per IRS Revenue Ruling 2019-24.
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