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Re: Cryptocurrency gambling

Initiate

Views 4601

Replies 7

Hi,

 

Given that the ATO has declared that cryptocurrencies are assets subject to CGT, but that gambling winnings are exempt from CGT, I am interested to clarify exactly how the ATO treats gambling with cryptocurrencies.

 

Scenario A:

Tom buys 10 ethereum for $15000. 2 months later he sells them for $20000. He has made a $5000 capital gain that is subject to tax.

 

Scenario B:

Tom buys 10 ethereum for $15000. 2 months later he gambles ALL 10 of them on an online cryptocurrency casino and makes a net win, coming away with winnings of 11 ethereum. He then sells his 11 ethereum winnings for 22000. The ATO lists "winnings or losses from gambling, a game or a competition with prizes" as being exempt from capital gains tax.

 

Is Tom still subject to any capital gains tax in Scenario B?

 

 

 

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Devotee

Replies 1

Think of them as marbles.

You buy marbles, you swap them for future spins in a poker machine.

You bought them for $10k.

The gambling place gave you 1000 spins that if you used cash would cost you $1000.

You swapped marbles for future spins.

That’s a Barter transaction isn’t it?

What are the spins worth at this stage? 97% of what they cost you accounting for the standard loss from gambling?

A capital loss?
7 REPLIES 7

Taxicorn

Replies 5

If 2 months later they are worth $20,000 and he wins $2,000 then $20,000 is subject to capital gains and $2,000 is not?

 

This is just pure speculation.

 

For example If I earn $5,000 in Capital gains from an investment and take that and gamble it and win $5,500 then $500 would be exempt because it it was won.

Initiate

Replies 4

I'm not sure it can reasonably work that way where gambling is concerned though.

 

Otherwise, if Tom were to lose, he then owes $5000 CGT on money that is no longer his.

 

 

 

 

Initiate

Replies 3

Re-thinking it, I see what you mean. If he loses the losses would also be exempt.

 

Scenario C then:

Tom sells only his CGT exempt net winnings of 1 ethereum for $2000, keeping the remaining 10.

He gambles all 10 again, this time making a net loss and coming away with 9 ethereum.

He gambles all 9, making a net win again and getting back to 10 ethereum.

He again sells his net winnings of 1 ethereum for another $2000.

He then decides to leave his remaining 9 ethereum alone.

Is any of the $4000 he has made selling off his winnings subject to CGT?

 

 

Initiate

Replies 2

With a traditional investment the scenario is pretty clear as you say, because if you make a $5000 capital gain (e.g. you sell shares for $5000 profit) prior to gambling with it, a CGT event has clearly occurred prior to the gambling.

 

With gambling directly in cryptocurrency however, there is no prior sale of it that would clearly constitute a CGT event.

Most helpful response

Devotee

Replies 1

Think of them as marbles.

You buy marbles, you swap them for future spins in a poker machine.

You bought them for $10k.

The gambling place gave you 1000 spins that if you used cash would cost you $1000.

You swapped marbles for future spins.

That’s a Barter transaction isn’t it?

What are the spins worth at this stage? 97% of what they cost you accounting for the standard loss from gambling?

A capital loss?

Devotee

Replies 0

Make that gambling place gave you future spins worth $10k not $1k

I'm new

Replies 0


@___ wrote:

Hi,

 

Given that the ATO has declared that cryptocurrencies are assets subject to CGT, but that gambling winnings are exempt from CGT, I am interested to clarify exactly how the ATO treats gambling with cryptocurrencies.

 

Scenario A:

Tom buys 10 ethereum for $15000. 2 months later he sells them for $20000. He has made a $5000 capital gain that is subject to tax.

 

Scenario B:

Tom buys 10 ethereum for $15000. 2 months later he gambles ALL 10 of them on an online cryptocurrency casino and makes a net win, coming away with winnings of 11 ethereum. He then sells his 11 ethereum winnings for 22000. The ATO lists "winnings or losses from gambling, a game or a competition with prizes" as being exempt from capital gains tax.

 

Is Tom still subject to any capital gains tax in Scenario B?

 

 

 


It all hardly works in real life!
There are a lot of nuances where smart people will not risk their savings in order to avoid taxes, because the risks are often much higher than a simple description in the situation!