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Cryptocurrency: identifying cost of each 'parcel' being sold

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Initiate

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When calculating profit/loss for crypto trades, do we have to use the First-in-first-out (FIFO) method? Or if we can identify the parcel being sold, can we use the correct cost?

For example:
Ethel buys 1 Bitcoin on an exchange and kept it in the exchange wallet. 11 months later, Ethel uses a different exchange to buy 1 bitcoin, then sold it one week later. 2 months later, Ethel sells the 1 bitcoin on the first exchange (after holding it for 13 months).

(Assuming that dear old Ethel hasn't also been carrying on the business of trading) can she correctly attribute the cost of each parcel, making her eligible for the 50% CGT discount, on the first parcel held >12months ?    ¯\_(ツ)_/¯

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Devotee

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I’m no expert, and based only on reading this, and may be wrong:

http://law.ato.gov.au/atolaw/view.htm?locid=%27CGD/TD33/NAT/ATO

I think in all such situations if you can identify the particular item you have sold specifically then it’s cost is what you use, else it is First In First Out.

If you can’t identify individually, if you buy (sell) the same day then that is the only time you can use average cost for more than one parcel being the cost for all purchased (sold) that day. The “same day” would be a 24 hour period by default being midnight to midnight where you live in Australia, and if that can’t be determined then Canberra.
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Best answer

Devotee

Replies 1

I’m no expert, and based only on reading this, and may be wrong:

http://law.ato.gov.au/atolaw/view.htm?locid=%27CGD/TD33/NAT/ATO

I think in all such situations if you can identify the particular item you have sold specifically then it’s cost is what you use, else it is First In First Out.

If you can’t identify individually, if you buy (sell) the same day then that is the only time you can use average cost for more than one parcel being the cost for all purchased (sold) that day. The “same day” would be a 24 hour period by default being midnight to midnight where you live in Australia, and if that can’t be determined then Canberra.

Initiate

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Thanks Jack1. Yes I came to a similar conclusion reading this determination (http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR964/NAT/ATO/00001). I'm wondering if holding the same asset types in different accounts makes them identifiable as separate lots/parcels and thus the correct cost basis could be applied. I would think so.
I'm also keen to know if an individual can use an exchange (and cold wallet) for long hold 'investments' and a separate exchange for day trading with different tax treatment accordingly - or would ALL assets be classed as trading stock on a revenue account once the person's day trading activity is classified as a trading business.
In which case, I imagine the activity would need to be completely split between separate taxable entities (eg. investments held in a trust and trading stock in a company).

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