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Re: Capital Gains Tax On Bitcoin/Cryptocurrency Clarification

Newbie

Views 7885

Replies 15

Hi All,

 

I just wanted to clarify, what would actually happen if our CGT exceeds our income significantly and we cannot actually pay it? Say for example I am on a salary package of $70k and I have made a $1mil profit within cryptocurrency. How Would one go about paying tax on capital gains? 

 

Thanks!

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Former Community Support

Replies 6

Hi @tjhunt03,

 

Thanks for your post – we’re sorry for the delay in our response, and we appreciate your patience.

 

Capital gains tax is one component of your income tax – any net capital gain you make is added to the rest of your taxable income, and you pay tax on the appropriate marginal tax rate.

 

‘Net’ is important to this definition. You calculate your capital gains on:

  • your total capital gain for the year MINUS
  • your total capital losses MINUS
  • any discounts you’re entitled to.

You’ll also need to work out the cost base for your capital assets. The cost base is made up of the expenses you had to acquire, own, preserve or defend your ownership of your asset, and is taken away from your capital gain.

 

Once you’ve calculated your net capital gain, you add this to the rest of your income in your tax return, and we’ll calculate your total tax payable.

 

Our guides to CGT and the have more information and examples to help explain how to complete your return.

 

If you have a capital gain on your investments that lead to a tax bill at the end of the financial year, call us to discuss your payment options.

Thanks!

15 REPLIES 15

Initiate

Replies 7

you only pay capital gain tax when the gain is realised, no tax liability on unrealised gain.

 

RS

Newbie

Replies 3

Oh cool, so its only if you end up selling it? Smiley Happy 

Initiate

Replies 0

that is correct, otherwise it would be not fair to pay tax on some profit you have not "earned"

Initiate

Replies 1

If you made trades to get those gains, you will be looked at as a trader and you now hold "trading stock"

 

If they use Share Trading as precedent to your activity you will probably be deemed to be conducting a business have a look at the example at the bottom of this page:

https://www.ato.gov.au/General/Capital-gains-tax/Shares,-units-and-similar-investments/Shareholding-...

Molly does 60 Trades over 12 months, Looses $5k.
(Molly's activities show all the factors that would be expected from a person carrying on a business. Her share-trading operation demonstrates a profit-making intention even though a loss has resulted.)

Meaning no CGT concession for holding over 12 months and you now hold trading stock.

And you are liable to pay income tax on every profit on every trade at tax time even if you never return to $AUD.

 

But i am here to find out the details too, So lets hope what i was informed is incorrect. 
however they are a little inundated with enquiries so wait for a response from somone at the ATO.

 

 

Newbie

Replies 0

There may also be capital gains tax consequences where you dispose of bitcoin as part of carrying on a business. However, any capital gain is reduced by the amount that is included in your assessable income as ordinary income.

 

It sounds like you are only charged with capital gains/losses until you sell bitcoin where it says "Where you dispose of bitcoin". 

Newbie

Replies 2

so what if you convert 1million BTC to 1 million BCH 

 

People are saying converting one cryto currency to another triggers a captial gains event. How they hell are you meant to pay captial gains on on this without cashing out to fiat. If you cash out bitcoin to pay tax this would require you pay even more tax ( next year i guess ). 

Initiate

Replies 1

Yeah this doesn't make sense. It makes sense to me that you'd be taxed on whatever sum you bring back to AUD, not taxed on trades that you don't actually have real money for.

Newbie

Replies 0

Unfortunately, Capital Gains Tax does not work like that. Similar to trading a house for a house, you will be deemed to have made a sale at Market value at the time of the transaction. If you have traded a coin for a coin, that is a deemed CGT event A1 and you will have to pay capital gains tax on that.

Most helpful response

Former Community Support

Replies 6

Hi @tjhunt03,

 

Thanks for your post – we’re sorry for the delay in our response, and we appreciate your patience.

 

Capital gains tax is one component of your income tax – any net capital gain you make is added to the rest of your taxable income, and you pay tax on the appropriate marginal tax rate.

 

‘Net’ is important to this definition. You calculate your capital gains on:

  • your total capital gain for the year MINUS
  • your total capital losses MINUS
  • any discounts you’re entitled to.

You’ll also need to work out the cost base for your capital assets. The cost base is made up of the expenses you had to acquire, own, preserve or defend your ownership of your asset, and is taken away from your capital gain.

 

Once you’ve calculated your net capital gain, you add this to the rest of your income in your tax return, and we’ll calculate your total tax payable.

 

Our guides to CGT and the have more information and examples to help explain how to complete your return.

 

If you have a capital gain on your investments that lead to a tax bill at the end of the financial year, call us to discuss your payment options.

Thanks!