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AusCrypto2022(Initiate)Initiate
21 Aug 2022

I place my crypto (CRO) as collateral on tectonic finance and loan out crypto(USDT) with payable interest 2.74%.


Q1: The crypto Loan USDT$1000 I received from Techtonic Finance is taxable? I pay back the USDT$1000+interest after 3 months, and get back my CRO crypto (Collateral).


Q2: when calculating my tax, do I just skip (not counting as gift/income) the incoming USDT$1000 as it is a loan which i have to pay back the same amount at later stage?


Looking forward to your response.


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CryptoTaxKing(Initiate)Initiate
28 Aug 2022

@AusCrypto2022 because it's a stable I'd there's very little chance you made a profit or a loss on the loan transaction specifically, but that's not really a reason to skip it. Just include that your gain on the transaction was $0.


Then, assuming you withdrew that $1000USDT into fiat, you would have the tax on that USDT disposal, or if bought more crypto with the loan, you would obviously have tax that disposal as well.


On the CRO however, if what you received was valued at more or less than when you first placed/deposited it, you would have a capital gain or loss event.


For example, say you gave Techtonic the $1,000 worth of CRO in August 2021, and you got it back in November 2021. CRO had more than doubled in price during that time, so, the CRO you received back after the loan would actually be worth $3,000. Not $1,000. Meaning you would have to pay tax on the $2k gain.


AusCrypto2022(Initiate)Initiate
6 Sept 2022

According to my further reading regarding the borrowed crypto fund, it all depends on what you borrow and how you use it.


"If you’ve borrowed fiat currency (or an equivalent stablecoin) with crypto as your collateral, you can use this currency however you want without triggering any taxable event as you won’t recognize any capital gains using these currencies.


If you’ve borrowed crypto to further invest, any of these investments will follow the same crypto tax rules that already exist. So if you’re selling, swapping or spending crypto - any gains would be subject to Capital Gains Tax.

Similarly, if you’re borrowing crypto to increase your yields through margin trading - any realized gain at the point you close your position would be subject to Capital Gains Tax."


Source


Appreciate if ATO can confirm the above statement

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Loan a Crypto is taxable? | ATO Community