To the ATO Officials.
My accountant and myself are confident on the answer but would like official guidance before lodging returns.
Question: I would like to clarify whether this situation was a capital gain event or if no event occurred since the token has the same rights and relationship as the original and the merger was not done to gain any price value.
Background:
My long-term investment by the name of OMI went through a Token Migration in that they upgraded from Go Chain to the ERC-20 network. The previous token, being Go chain based were replaced with the new ERC-20 version. The migration did not produce a token with any different rights or relationships from the original and the monetary value of the token did not change. Both serve the same purpose as an investment related to their product, VEVE.
All chart history remains the same and the value of the token stayed the same with no gain or loss. There is still GO Chain versions in circulation but only because they have yet to be migrated and now serve no purpose. Even the exchange API and CSV files do not note any difference in the token history or even the event occurring.
The exact process was, I sent my original, go chain, tokens to the required exchange and then withdrew them as the ERC-20 version. The migration was mandatory and everyone was informed that all future dealing / transactions would be on the new erc-20 version.
This tax ruling would decide for me if I maintained the investment of OMI or lost it when the migration occurred. At that point I had held some for over 12 months and my intention was to hold all remaining until at least they all passed the 12-month period.
Thought process:
1:1 Redenomination / stock split
Below link goes to an example that was addressed here in the forums. The official answer from the ATO member was
“If a token migration has taken place and the value of the redenomination has not changed, you would not have a capital gain or loss to declare”
I actually believe that this is a stronger case then the one mentioned as all history stayed the exact same
https://community.ato.gov.au/s/question/a0J9s0000001IMHEA2/p00046871
I also found the below statement: “you will not have to pay tax on the exchange if the coin is switched at a 1:10 ratio or 1:1 ratio, as long as the value of your assets stays intact”
Chain Split: I don’t think this one suits but if considered a chain split then the ATO has the below statement.
"if one crypto asset has the same rights and relationships as your original crypto asset, it is a continuation of the original asset. Therefore, the other crypto asset you hold because of the chain split will be a new asset"
The ERC-20 version has the exact same rights and relationships making it the continuation of the original assets. whereas the Go chain version is no longer tradable so would be considered the new token. This would mean that no CGT even occurred for the ERC-20 version and it would maintain the same value and purchase date as it did before the chain split.
Similar migrations have occurred in the past, across a few different tokens such as EOS and KNC. To me this OMI migration is actually the strongest example since it maintained all rights, relationships, history and value as the one it replaced.
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