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How will crypto currency coin-to-coin swaps/trades be treated for CGT purposes?

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Within most crypto currency exchanges, there is the ability to swap one coin (currency) for another without converting back to AUD first.

  1. For example, I have 1 Bitcoin on an exchange. The AUD value goes up and I decide to diversify into another coin. On this particular exchange I can swap half my Bitcoin holding for 8 Ethereum (another alternate coin). After this swap/trade I am now holding 0.5 Bitcoin and 8 Ethereum. I convert my 8 Ethereum back to Bitcoin once the AUD value of the Ethereum coin increases, this time converting back to 0.6 of a Bitcoin. So my total holding on this particular exchange has now grown from 1 Bitcoin to 1.1 Bitcoin. No physical conversion back to AUD has taken place in this process. Does the swapping of one coin for another trigger a CGT event?
  2. This time I have 1 Bitcoin on an exchange. The AUD value goes up and I decide to diversify into another coin. I sell 0.5 Bitcoin on the exchange, which credits my sale proceeds back to AUD which they continue to hold on my behalf. Next week, I then use those funds to buy 8 Ethereum. By time the AUD value of the 8 Ethereum had gone down and I have an AUD balance left over on the exchange. So on the exchange I am now holding 0.5 bitcoin, 8 Ethereum and $500 cash. I decide to realise my profit of $500 and ask the exchange to send $500 back to my bank account. Does the selling of the initial 0.5 Bitcoin trigger a CGT event, even though the AUD amount has not left the exchange and has mostly now been reinvested? Or is the withdrawal of the $500 ‘profit’ back to my bank account the only capital gain event in this situation?

Please be aware that either/both of the above situations may happen regularly/frequently as investors ‘trade’ to build up their portfolio, with some ‘trades’ being for low AUD values. Therefore to keep track of buy/sell prices for each trade to then calculate any capital gain or loss per trade would be an administrative nightmare, and place an unrealistic burden on the tax-payer.

I would like some clear guidance on calculating my capital gains, so that I can put aside some of my profits to meet my tax obligations at year end.

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Hi @Poppy,

 

Thanks for getting in touch!

 

We know there's a lot of interest in Bitcoin at the moment, especially given the activity on the stock exchange. We can offer general information, but if your questions are specific to your personal tax and financial affairs, it might be best to contact us privately to discuss your situation.

 

If you'd like more tailored information regarding your circumstances you can contact our Early engagement team by submitting a request form or requesting a callback. We'll be in touch within 2 business days to discuss your circumstances further.

 

Thanks.

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Best answer

ATO Certified

Community Support

Replies 0

Hi @Poppy,

 

Thanks for getting in touch!

 

We know there's a lot of interest in Bitcoin at the moment, especially given the activity on the stock exchange. We can offer general information, but if your questions are specific to your personal tax and financial affairs, it might be best to contact us privately to discuss your situation.

 

If you'd like more tailored information regarding your circumstances you can contact our Early engagement team by submitting a request form or requesting a callback. We'll be in touch within 2 business days to discuss your circumstances further.

 

Thanks.

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Yes, both of these sets of transactions triggers a CGT event.

Regardless of whether the crypto moves into FIAT (AUD), or not, there is a CGT event any time a coin is exchanged.

The only case where there is no CGT event is if the coin is transferred (for example from wallet to an exchange).

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