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Re: Cryptocurrency lending

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Initiate

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Hi there,

 

I would like to know the current ruling on cryptocurrency lending please. There appears to be very little information on the internet on this matter, and one discussion I found on this forum from the distant past was rather baffling. 

 

The specific example I created for this question is that I have crypto A idle on an exchange. Said exchange offers a lending option, whereby a prespecified portion of crypto A is deposited (inacessible) for a period of time. After the designated period of time, crypto A is returned with additional interest paid in crypto A.

 

1) I assume the interest is earned as ordinary income? Similar to staking rewards, this new crypto A would have to be assigned a dollar value on receipt?

2) Is this scenario a CGT event?

3) Is the original amount of returned crypto considered "new"? (mainly relevant for 12 month CGT discount)

 

Thanks. 

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Best answer

Devotee

Replies 1

Sounds like a term deposit / DRP scenario.

 

1) Yes - ordinary income - depending on the agreement, the amount may be treated as "interest" income.

2) No - but the cost base of the new crypto acquired = interest income. CGT applies only when you dispose of this "new crypto" parcel.

3) No - the original parcel retains its characteristic

 

At the end of this scenario you have 2 parcels.

the 1st being the original parcel - cost base = what you paid for it and the 2nd parcel with a cost base equal to the "interest" you earned - which should equal to the mv. of the crypto you are paid. 

2 REPLIES 2
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Best answer

Devotee

Replies 1

Sounds like a term deposit / DRP scenario.

 

1) Yes - ordinary income - depending on the agreement, the amount may be treated as "interest" income.

2) No - but the cost base of the new crypto acquired = interest income. CGT applies only when you dispose of this "new crypto" parcel.

3) No - the original parcel retains its characteristic

 

At the end of this scenario you have 2 parcels.

the 1st being the original parcel - cost base = what you paid for it and the 2nd parcel with a cost base equal to the "interest" you earned - which should equal to the mv. of the crypto you are paid. 

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Initiate

Replies 0

Thanks. This is exactly how i've understood it as well.