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Crypto currencies and CGT

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Newbie

Views 1298

Replies 2

Hello,

 

I am looking at buying some Crypto Currency and have noticed online there's a lot of chatter about how much and when you have to pay CGT.

 

Some people are saying every single trade you do whether its trading crypto or purchasing goods or services must be recorded as a CGT event and reported. I have a few questions below which would help myself and others understand exactly when we do have to pay report a CGT event.

 

If i were to buy $1000 of bitcoin on an exchange, then i transferred this bitcoin to an offline secure wallet and 3 months later this bitcoin is worth $2000 then i decide to transfer $1000 worth of bitcoin to the exchange and withdraw into my bank account as $AUD will that $1000 be a CGT event which means depending on my taxable income rate i will have to pay CGT on that amount? keeping in mind i have not withdrawn any more than i have initially invested but i do still have at that current days rates the value of $1000 in bitcoin left in my wallet.

 

Now if I were to do a few trades of crypto currencies but not back into $AUD are they CGT events? say i wish to buy ethereum using bitcoin but the exchange i am using does not have $AUD so I will not know an exact figure of the transaction in $AUD, I can get a rough idea from an Australian exchange but it will not be perfect. At the end of the financial year do i have to go through all of my records of crypto transactions and add up the gain vs loss and pay CGT on that or is it only when we sell the crypto back to $AUD that it is a CGT event?

 

Also if someone were to buy crypto as long term investment, lets say they bought 1 whole bitcoin at $20 000 AUD and they put it on a secure hardware wallet and kept it stashed away in a safe place for 3 years, in that time do they need to pay CGT each financial year on the applicable cost of 1 full bitcoin?

 

I personally would not be doing lots of trades but some will be doing tens of thousands which could be very difficult to accurately assess profits of each transaction.

 

http://law.ato.gov.au/atolaw/view.htm?DocID=TXD/TD201426/NAT/ATO/00001
I have read though this page but it seems there's a line in the sand between a trader for business purposes and just a regular crypto currency holder which uses it for online purchasing.

 

Thanks for your time I hope I can make out things a little clearer from some responses as I want to do this properly and not leave myself open for large tax bills if I do not report correctly.

1 ACCEPTED SOLUTION

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Best answer

ATO Certified

Devotee

Replies 1

Hi @mates85,

 

Thanks for your questions. We've developed a guide on how cryptocurrencies are treated for tax purposes to help you manage your tax obligations.

 

You need to keep the following records for bitcoin transactions:

  • the date of the transactions
  • the amount in Australian dollars (which can be taken from a reputable online exchange)
  • what the transaction was for
  • who the other party was (even if it’s just their bitcoin address).

The Commissioner of Taxation will not generally apply compliance resources to tax periods that started before 1 October 2014 for goods and services tax, or 1 July 2014 for other tax issues. This is for taxpayers that can show they have made a genuine attempt to determine the tax treatment of bitcoin and have adopted a consistent position on this in those past tax periods.

 

While we can provide general information here in the Community, we recommend applying for a private ruling to get detailed advice on your proposed cryptocurrency investment plans. Private rulings are written advice from us on how we think tax law applies to your situation to help you manage your tax. They're a free service, and we generally reply within 28 days.

 

Thanks!

2 REPLIES 2
Highlighted

Best answer

ATO Certified

Devotee

Replies 1

Hi @mates85,

 

Thanks for your questions. We've developed a guide on how cryptocurrencies are treated for tax purposes to help you manage your tax obligations.

 

You need to keep the following records for bitcoin transactions:

  • the date of the transactions
  • the amount in Australian dollars (which can be taken from a reputable online exchange)
  • what the transaction was for
  • who the other party was (even if it’s just their bitcoin address).

The Commissioner of Taxation will not generally apply compliance resources to tax periods that started before 1 October 2014 for goods and services tax, or 1 July 2014 for other tax issues. This is for taxpayers that can show they have made a genuine attempt to determine the tax treatment of bitcoin and have adopted a consistent position on this in those past tax periods.

 

While we can provide general information here in the Community, we recommend applying for a private ruling to get detailed advice on your proposed cryptocurrency investment plans. Private rulings are written advice from us on how we think tax law applies to your situation to help you manage your tax. They're a free service, and we generally reply within 28 days.

 

Thanks!

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Newbie

Replies 0

Hello Amanda,

 

Thanks for the reply.

 

I think the main question I have would be in the simplest terms possible, If i were to deposit AUD onto an exchange buy 1 type of crypto currency and then trade that for another kind is that a taxable event or only once i trade back to AUD?

 

simplest way of asking is crypto to crypto trade taxed or just crypto back to AUD taxed? If crypto to crypto is taxed how do I determine the AUD price and like other tax logements the ATO must have it exact to dollar and cent or fines apply how can i get this 100% accurate for the tax lodgement without facing penalties?

 

It seems difficult to guage how you value crypto as a lot of exchanges only base it off bitcion (satoshi's) and no dollar value not to mention there is no federal exchange rate set by the government for each crypto so some exchanges that do deal with AUD can be 5 - 15% difference in valuation