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Re: Crypto to Crypto Trades: Capital Gain Tax

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Newbie

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Hi Everyone,

 

Thanks for everybody who's contributed in these forums. It's all incredibly useful information.

I have been reading on here for quite a few months, trying to understand the taxation rules related to Crypto.

 

Whilst there is no doubt that any profits made from Cryptocurrency trading are taxable, throughout the last year, myself and many others have wondered what the tax implications were for Crypto to Crypto trades. There has been quite a bit of confusion on this matter, even here on this forum.

 

I have just been pointed to new guidelines on this matter, which were posted on 29/06/2018 (or so I believe, based on the last modified date): 

 

https://www.ato.gov.au/General/Gen/Tax-treatment-of-crypto-currencies-in-Australia---specifically-bi...

 

In summary, this acknowledges that Crypto to Crypto trades are fully taxable for CGT.

 

Honestly, this is sudden choas. I have been trading since November 2017, and have made plenty of profits through 10+ trades between cryptos (the market was booming, it's really not because I'm a sophisticated investor). When the market started to dip in Jan 2018, I stopped trading. Currently, my portfolio is not worth much due to the heavy losses. 

 

To clarify:

- Throughout my entire trading experience, I have not sold anything to AUD. Just bought from AUD to Crypto.

- I maintained a detailed spreadsheet with all my trades, per the guidance from the ATO at that time. But of course, if you use something like Etherdelta and whatever Chinese exchanges, how accurate is all this complex data?

 

The year has ended, and now we suddenly have these new rules. How can this be fair? Should I have known that these were the tax implications, I would've planned my trades differently (and kept them locally for credible tracking). I am now one small step away from a financial meltdown.

 

It's as if I unknowingly took a significant amount of risk.

 

I have reached out to an accountant, and they asked me to see another accountant, as they have no experience in this field.

 

I would be keen to know if any one else is in this situation, or may have some advice on this matter. I have a feeling that I'm not alone.

 

Apologies for the rant. I'm so upset.

1 ACCEPTED SOLUTION

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Best answer

Devotee

Replies 0

Hi @mattalk,

 

Thanks for your post.

 

It's great to hear you've been keeping detailed records and reading our posts here on Community to keep yourself informed on how tax applies to cryptocurrency. We've been working hard with out technical experts to try to make our responses as easy to understand and use as possible over the last few months, and we hope you've found it helpful.

 

We originally published our position on the tax treatment of bitcoin back in 2014, when cryptocurrency was still relatively new and largely unknown. We've expanded on this information over the last year as we received more detailed enquiries on how the ruling would be applied.

 

How tax applies to your situation depends on whether you're considered to be an investor or in the business of trading. The guidelines you mentioned in your post can help you work out which situation you're in and explain how tax will apply.

 

If you're an investor, you are right in that capital gains tax applies each time you dispose of cryptocurrency. While you'll need to calculate this on each trade, we look at your overall position at the end of the financial year, and if you have more capital losses than capital gains, you may not need to pay any additional tax.

 

We've provided a sample calculation on Capital Gains Tax on Crypto currency which shows you how to work out a capital gain. We've also developed a capital gains tax record keeping tool you can try - and this is where your carefully kept records come in handy! You can enter the information for each trade into the tool in order to estimate your overall position.

Thanks!

8 REPLIES 8
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Devotee

Replies 4

In all honesty.... you are 100% correct. These new Laws should be brought in for the next financial year, otherwise... bringing them in knowing precisely the situation that the market has dove, you're punishing poorer people and rich people can just get their accountants to write it off.

There is going to be many people who are paying tax on losses... and aren't these capital losses only caried over to next year if you're a Business trader, not a hobby trader? So this is tax on profit for an asset in a loss potentially never recovered?

I feel like the ATO is doing this in a hurry to catch people who have made millions, but the way they have done it 'without exception' or some kind of profit/tier system... has not protected the average person, who, lets be honest, do it out of curiosity, fun and the chance of making a windfall... You're not going to now find me down at wallstreet with my bankster hat on yelling buy!! sell!! now that i've traded in crypto. I'm just a regular person who sees an opportunity to ride a wave, and the ATO is essentially putting a Reef in place right when the wave is crashing down, and positioning it right in place for maximum impact. 

Which is a perfect analogy because if you draw enough blood from that, the sharks will come in. Meaning... if I am forced to sell off what i'm holding during a bear market to pay for tax on gains I don't have (as income, as that is the past price)... then I will be selling to all the people pushing confidence out of the market before the next rise (nations claiming 'regulations' with a tone of criminality among those fudsters looking to buy in cheap). It would be effectively the worst time right now to sell anything... it is potentially the floor of the bear market.

Also @mattalk i'm finding huge issues with HitBTC trading+deposit&withdrawal info not matching out with my account balance on there. And I just used the cointracking feature to add both my Ethereum wallets, and now it says I have 70 Ethereum unaccounted for, which is way way above what i've ever had. Maybe when I add in Ether/Fork data which i'm stuggling to export all of effectively, that will correct itself. Because I've done a lot of trading in and out there, maybe the 70 ETH is recycled accumulation, rather than some Ethereum wallet smart contract read error. Still it is not easy and almost impossible if I can't trust the data from the exchanges i've been using. Yet not entirely impossible because I know my account balances and can screenshot them, but I can't deal with the idea of having incomplete trading info. 

Enthusiast

Replies 2

Incredible isn't it? The ATO is essentially going to be financially destroying people with trading patterns like yours. Some people may owe hundreds of thousands despite never selling any crypto to AUD while their holdings are worth less than their tax bill. The ATO is either incompetent or malicious. When we debated negative gearing, it's all about grandafthering, not shocking the market etc... but with crypto traders.. a few months warning and whack. The most aggressive tax in the world IMO as even the US didn't just introduce crypto-to-crypto in the middle of the financial year.

They pretended to care with that "Let's Talk"outreach but as with all such governemnt community feedback, the response is always the finger.

It's ridiculous that with so little warning and such unfair laws people like you even have trouble finding an accountant to deal with your crypto. You might need to pay even more money for a specialist accountant just so to calcualte exactly how screwd you are.

Newbie

Replies 3

I have done the math using a sophisticated calculator I found online. Using the announced crypto to crypto CGT rules, I now have $86,000 of realized gain, and $79,000 of unrealized loss.

I don't know what to do now.

Devotee

Replies 0

the big issue again is no clear info on what the TAX actually represents. if CGT goes on income stream, then is the Tax % CGT or income Tax bracket based %

 

I have never ran a business and i've never earned over 17.5 thousand in a year, so I have no clue what amount of Tax i'd be paying and nobody from the ATO has stated how much % is taken from Capital Gains on Crypto (hobby vs business scnenarios). They have just said "you can record keep how ever you like and use an accountant with your lambo-crypto riches"... I don't have lambo-crypto riches sir, I have slightly less crippling student debt. I still owe 1600 AUD on this coming semesters topics, and if I don't pay it in the next few weeks I will have debt collectors on me (the lady at student help office got teary eyed when telling me they can give a reminder notice or two, but after that it is debt collectors). Then whilst studying fulltime, I will be trying to make a few good trades or something to pay any Tax bill i've never had before so I don't know 1. how to declare properly. 2. I kinda know what i'm declaring now. but 3. what is the %?

I know in some countries it is 1.3% of total assets ignoring any Capital Gain, and others it is no Tax on crypto, and i've read 30% CGT in Australia somewhere, maybe wikipedia, but I don't know.

A few months ago I was giving my commiserations to American traders and now everyone is giving their commiserations for me, for being in Australia and being into cryptocurrency/info technology gen2 Smiley Tongue so it must be pretty bad, in comparison to everywhere else.


Devotee

Replies 0

Trading patterns like mine? Just pointing out, bull market to bear market, has nothing to do with me and more to do with the unknown 'regulation' threat from people who don't care about crypto-space looking to profit from those that do. I'm just looking for arbitrage all the time as a trader. It isn't a pattern it is just trading and being punished as a trader. A pattern would be selling out around EOFY, or someone closing positions in shares before the weekend to avoid holding fees. Most traders in crypto don't have as much of a pattern as buy low sell high ... and ignore fiat until it matters. Or the FOMO/FUD pattern of buy high, sell low, buy high again -- wipeout.

It is twice as much effort, research and keeping up with news in crypto space to be an effective trader (which is how I kept afloat (in gain) during the drop...) but I get taxed twice as much as someone who thought "crypto-neato I shall buy some" and then forgot about it for 12months and "oh look I am rech and only need to pay 50% of CGT". 

People who bought last July would probably be about even anyway, so I guess they are targetting the CGT in full force at those who probably carry more profit. Whilst also seeming to make concessions for those people who are less active in cryptospace. 

I guess if you're going to play around with trading the message is to be good enough at it, to make it your business. 

Devotee

Replies 1


@mattalk wrote:
I have done the math using a sophisticated calculator I found online. Using the announced crypto to crypto CGT rules, I now have $86,000 of realized gain, and $79,000 of unrealized loss.

I don't know what to do now.

Well... 30% on 85k is 25.8k ... if that is the flatrate on CGT, OR if it goes on as income and you have 4k income from elsewhere then are in the 90.001k+ taxbracket... then it is from 22.78% upto 30% if you hit 180k 

(strangely if wikipedia is to be trusted... 90k income gets you 23.11% tax whilst one dollar over 90k gets you 22.78% tax hahaha)

point is you have a 25.8k tax bill for real profit of 7k (if it is 30%)... the biggest killer in my eyes would be selling that 7k of crypto (cementing losses) to pay a debt on gains you never held in money you could spend on lambo https://www.youtube.com/watch?v=PKFtBuQ21Jw

 

the real question is not "how do I pay a tax bill more than any money I have or assets I hold?" but, have you ever thought about living in switzerland?

Devotee

Replies 0

@mattalk the fine for not lodging last years tax return is 210 every 28 days x5 max. so 1050 max. would your coins you'd be worth selling net you more than 1050 in profit this financial year Smiley Very Happy but seriously, this is something worth considering... on a practicality basis with such an extensive loss. also if you did stall lodging 2016/2017 because of this debt to the ato, would it be cancelled out by losses of that same CGT item from 2017/2018? if you sold it all now/this year at the new lower value? 

you'd pay 1050, but atleast not be out of pocket 25.8k you don't have?

 

p.s. https://www.ato.gov.au/General/Paying-the-ATO/Help-with-paying/

Best answer

Devotee

Replies 0

Hi @mattalk,

 

Thanks for your post.

 

It's great to hear you've been keeping detailed records and reading our posts here on Community to keep yourself informed on how tax applies to cryptocurrency. We've been working hard with out technical experts to try to make our responses as easy to understand and use as possible over the last few months, and we hope you've found it helpful.

 

We originally published our position on the tax treatment of bitcoin back in 2014, when cryptocurrency was still relatively new and largely unknown. We've expanded on this information over the last year as we received more detailed enquiries on how the ruling would be applied.

 

How tax applies to your situation depends on whether you're considered to be an investor or in the business of trading. The guidelines you mentioned in your post can help you work out which situation you're in and explain how tax will apply.

 

If you're an investor, you are right in that capital gains tax applies each time you dispose of cryptocurrency. While you'll need to calculate this on each trade, we look at your overall position at the end of the financial year, and if you have more capital losses than capital gains, you may not need to pay any additional tax.

 

We've provided a sample calculation on Capital Gains Tax on Crypto currency which shows you how to work out a capital gain. We've also developed a capital gains tax record keeping tool you can try - and this is where your carefully kept records come in handy! You can enter the information for each trade into the tool in order to estimate your overall position.

Thanks!

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