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Re: Decentralised exchanges and Centralised International Exchanges

Newbie

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Replies 6

 

Decentralised exchanges

If a portfolio of crypto is owned by an Australian Pty Ltd company, is it acceptable for this company to use decentralised exchanges such as Uniswap, Raydium, Pancakeswap, and Serum? Decentralised exchanges cannot be registered with the KYC details of the Pty Ltd company as the exchanges are decentralised.  However, if stable coin crypto is sent from the Pty Ltd company KYC registered exchange account to a decentralised exchange and used to trade, swap, and then sent back to the KYC registered Pty Ltd company exchange account as stable coins, will these investments and trades still be considered to be within the Pty Ltd company portfolio?

 

Centralised International Exchanges

Is it acceptable for an Australian Pty Ltd company to use international exchanges such as FTX and Kucoin provided that the exchange account is registered with the KYC details of the Australian Pty Ltd company?

 

Decentralised wallets

How are decentralised wallets and the portfolios in them proven to be owned by an Australian Pty Ltd company when no KYC registration is available?

 

Any assistance would be greatly appreciated. Thank you. 

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Most helpful response

ATO Community Support

Replies 2

Hi @Dotto

 

We don't have restrictions for how companies can trade in crypto or hold crypto. There may, however, be restrictions imposed by the Corporations Act 2001, which ASIC handles. You should check with them.

 

@spirax has provided some great information to get started and continue on the conversation. I love to see our community going back and forth to learn together Smiley Happy

 

Our crypto recording keeping requirements are:

  • the date of transactions
  • the value of the cryptocurrency in AUD at the time
  • what the transaction was for and who the other party was.

 

And while we have general record keeping for crypto requirements, this sounds like it's less cut-and-dry than our usual scenarios. If you're considering investing or trading with your company, we recommend you seek tailored business advice on how to go about it in both the best way for profits, and bookkeeping requirements. You may wish to talk to our Early Engagement team to find out the best way to keep records based on your individual circumstances.

 

You can read more about our record keeping for crypto requirements on our website.

6 REPLIES 6

Enthusiast

Replies 1

Interesting question. I'm not a professional in this space, so please take my comments with a grain of salt.

 

I am unware of any restrictions on how Australian Pty Ltd companies can utilise DEX and CEX exchanges.

 

The specific answer to your question would most likely depend on the specific terms on conditions of the exchanges.

 

Most exchange accounts are custodial meaning the exchange is acting as a custodian and the registered account owner still owns the coins (when they are transferred to the exchanges wallet). So I think that for tax purposes, this is the default position that the ATO would take for accounts of this nature.

 

But in this case, you could also have other agreements in place whereby the account owner is actually just holding and trading coins on behalf of another entity (probably holding them in some sort of trust).

 

I think is likely a fairly common scenario so it would be great if the ATO could clarify what documentation is required for tax purposes.

 

My thoughts are that you probably need some sort of written proof but I don't know if something more specific would be requried to satisfy the ATO during an audit.

 

Newbie

Replies 0

Thanks Spirax. I appreciate your response here.  I am aware that this is all new territory for the ATO but it would be great to get some further clarity from them regarding these issues. 

Most helpful response

ATO Community Support

Replies 2

Hi @Dotto

 

We don't have restrictions for how companies can trade in crypto or hold crypto. There may, however, be restrictions imposed by the Corporations Act 2001, which ASIC handles. You should check with them.

 

@spirax has provided some great information to get started and continue on the conversation. I love to see our community going back and forth to learn together Smiley Happy

 

Our crypto recording keeping requirements are:

  • the date of transactions
  • the value of the cryptocurrency in AUD at the time
  • what the transaction was for and who the other party was.

 

And while we have general record keeping for crypto requirements, this sounds like it's less cut-and-dry than our usual scenarios. If you're considering investing or trading with your company, we recommend you seek tailored business advice on how to go about it in both the best way for profits, and bookkeeping requirements. You may wish to talk to our Early Engagement team to find out the best way to keep records based on your individual circumstances.

 

You can read more about our record keeping for crypto requirements on our website.

Enthusiast

Replies 1

Hi @BlakeATO,

 

That makes sense. I don't want to hijack @Dotto's question but I think it makes sense to ask the following here as it is the same topic.

 

What I'm wondering about specifically is, say a custodial exchange is account is registered under a certain entities name, but the coins in the accounts being to another entity.

 

There are various things that mean this is probably a reasonably common scenario, these are:

 

* Some exchanges will only allow individuals (as opposed to companies) to register accounts

* Some exchanges only allow one account per entity, and say if say the exchange didn't support sub accounts, a single entity might want to make use of multiple accounts for risk management purposes

* Some exchanges offer fee discounts based on trading activity, so one entity might use another entities account to trade (because they will pay less fees than if they registered their own account)

 

How the relationship between the registered account owner (who is effectively also acting as a custodian - just as the exchange is acting as a custodian) and the real benficiary/owner of the assets is structured will determine what legal documentation/paper work is necessary/sensible.

 

For example, trusted parties (e.g. I could imagine family members/close friends doing this sort of thing) may just make a verbal/handshake agreement, generally speaking such agreements are legally binding so I presume the ATO would need to recognise such an agreement somehow.

 

But I am wondering what the ATO would need to be satisified of this in the case of an audit.

 

Let's make things simple and say:

* Mary registered an account on a custodial spot exchange

* John funded and traded with the account

* Mary didn't declare anything in her tax return because she didn't actually make or loose anything

* John did declare his profits

* The ATO got the records from the exchange and found that an account registered to Mary made some profit but Mary didn't declare anything

* The ATO audits Mary because of this discrepency

 

What would the ATO need to see during the audit to be satisfied that both Mary and John paid the right amount of tax?

Enthusiast

Replies 0

Too late to edit, but I wanted to change the last sentence (which is the specific question I am interested in) to:

 

Other than the things you mentioned already, what else would the ATO need to see during an audit to be satisfied that both Mary and John paid the right amount of tax?

 

i.e. Should Mary have kept additional records to show that she was acting as a custodian for John? Or is there nothing specific required here (in which case I presume the ATO would just take her and John's words for it as long as they both agreed on what had happened)?

 

ATO Community Support

Replies 0

Hi @spirax

 

Generally the income would be attributed to the account holder. Mary would need to prove and show evidence the income isn't hers. I recommend getting in touch with our Early engagement team to confirm what would be sufficient.