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Capital Gains - Transferring between family wallets

Newbie

Views 1032

Replies 6

All,

 

This year, I have started investing/trading in CryptoCurrency. As a newbie, while exploring, I have transferred CryproCurrency to my Spouse and after a month or so, she again deposited that back to my wallet.

 

Ex:  Say,

        Event 1 - One Bitcoin was bought at 5000$ by the Husband.

        Event 2 - After a month, One Bitcoin is worth 10000$ was transferred from Husband to Wife.

        Event 3 - After a month: Wife returns the Bitcoin to her Husband.On this day the bitcoin is worth 15000$.

 

Could you please help me to understand that the above scenario has triggered Tax events here?

In this case, Does both Husband and Wife needs to pay the tax even though the Bitcoin is not sold?

 

Thank you for your time.

 

 

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Devotee

Replies 1

Crypto is treated as any other asset - with the caveat being that it may be a personal use asset (kinda depends on the circumstance of how and why you are using it).

 

Assuming here that its not a personal use asset, the treatment for Australian tax purposes would be like any other capital asset (like shares in a company). 

 

CGT events occur when there is a transfer of beneficial ownership eg. transfer from one legal entity to another, as such the transfer of crypto from you to your spouse (and back) would trigger a CGT event (on each leg). There's a rule called the market value subsititution rule which deems the value of a transaction at the market value if the transfer was not undertaken at market value.

6 REPLIES 6

Most helpful response

Devotee

Replies 1

Crypto is treated as any other asset - with the caveat being that it may be a personal use asset (kinda depends on the circumstance of how and why you are using it).

 

Assuming here that its not a personal use asset, the treatment for Australian tax purposes would be like any other capital asset (like shares in a company). 

 

CGT events occur when there is a transfer of beneficial ownership eg. transfer from one legal entity to another, as such the transfer of crypto from you to your spouse (and back) would trigger a CGT event (on each leg). There's a rule called the market value subsititution rule which deems the value of a transaction at the market value if the transfer was not undertaken at market value.

Initiate

Replies 0

What if the oringal purchase of crypto is from a joint bank account? 

Would the total value of the crypto not be shared amongst husband/wife?

And the tax burden be equally distributed?

Much like stocks/property?

In this scenario, could it be interpreted as a transfer between personal accounts?

ATO Community Support

Replies 3

Hi @cryptodude78,

 

Reporting a capital gains tax (CGT) event will depend on who owns the bitcoin. You advised it was purchased by yourself, then a month later transferred to your spouse, a month thereafter transferred back to you. If you sell/dispose/transfer or use the coin to purchase something this is seen as a transaction.

 

Transacting with cryptocurrency can result in a CGT event. You can use our website for information on this. As @TaxedoMask advised, you will need to know market value of the coin when each transfer took place. The CGT asset needs to be held by the owner for a period of 12mnths to apply the 50% CGT discount. You may wish to speak with a financial advisor or read up on information via our website.  

 

Please use the links for further assistance.

 

Links-

Transacting with cryptocurrency.

Record keeping for cryptocurrency.

Working out your capital gain or loss.

 

All the best.

 

Newbie

Replies 0

Thank you all for your replies.  what I gather is, it's a CGT event. I will speak to my tax consultant during filing. 

Initiate

Replies 1

Hi Jodie,

 

Could it be argued that 'WE' own the bitcoin? Just like 'we' own the house and 'we' own the cash in the bank? It's an implied agreement through marriage that the assets are 'ours'.

 

In the event of a divorce for instance, the court would see this asset as being shared by both parties.

 

When opening an account in an exchange, I cannot see a way to have a 'joint account', as KYC documentation is only applicable for one person per account. 

 

ATO Community Support

Replies 0

Hi @cryptodude78,

 

I can understand where you are coming from. However, from a tax perspective, capital gains tax assets would need to be purchased and reflect joint ownership from the outset to be considered jointly owned. Capital gains tax assets can be owned by more then one individual. This is generally how income and deductions are determined, according to legal ownership of the asset. If you cannot demonstrate legal ownership by both parties, it will be whoever purchased the item and owns it legally. There are differing rules for a relationship breakdown, these are usually overseen by courts of law.

 

If you want to provide your circumstances and receive a written response, you can submit an online form or request a callback from our early engagement team. 

 

Links-

Joint ownership.

Early engagement. 

 

Kind regards,

Jodie_ATO.