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Tax for total asset or for which part I cash out ?

Newbie

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Replies 3

Hi,

I would like to ask about tax for my crypto investment .

 

Example for my case:

- Total invest from 2017 to now : 150,000 (haven't cash out yet, and haven't declare tax yet )

- From 2017 to 30/06/2020 : average loss 40,000 in crypto each years . Asset in crypto at 30/06/2020 : 30,000 ( no cash out , count on crypto only ) 

- Now : total asset count on crypto : 3,000,000

- I have a plan cash out 150,000 before financial year 2021. And 2,850,000 after financial year 2021. 

On financial year 2021 , which part I have to pay tax for ? 150,000 or 3,000,000 ?

 

Kind regards,

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Accepted Solutions

Most helpful response

ATO Community Support

Replies 2

Hi @DK89

 

When you dispose of capital assets, you only report (and pay tax on) the portion that you dispose of.

 

As an investor, you need to be able to identify which assets you dispose of. You'll need to choose the portion you're disposing of, whether that's a set of crypto you purchased this week, or in 2017.

 

When you cash out $150,000, you need to work out how much of that crypto you're disposing of. Say it equals 40 of one cryptocurrency. You need to work out when you purchased that crypto, and what its value was when you purchased it. You need to work out other costs associated with its acquisition and maintaining it, too. These costs form your cost base (which you take from your profit to work out your total capital gain). This means you're only paying tax on the gain of the amount you cashed out.

 

To put it in a more tangible example:

  • You buy 50 trading cards in 2017 for $500 total ($10 each).
  • It costs you an additional $50 for broker fees and transfer fees into your name (an additional $1 per card).
  • This brings your cost base to $11 per card.
  • You buy another 10 trading cards in 2019 for $110 ($11 each) with the same broker and transfer fee ($12 total each).
  • You then sell 10 cards in 2021 for $500 total. You choose to say they're the cards purchased in 2017 ($50 each). You keep the rest of the cards from that time (valued at $2,000 total still) and the 2018 cards too.
  • You only calculate your gain on the $50 each. You subtract your cost base from each card's value ($11). This means your capital gain for each card is $49, or $490 in total. You report and pay tax on that $490.

 

You can use the links below for further assistance.

 

Links-

Identifying when shares are acquired and disposed

Working out your capital gain

Transacting with Cryptocurrency.

Record keeping for cryptocurrency.

 

All the best.

3 REPLIES 3

Most helpful response

ATO Community Support

Replies 2

Hi @DK89

 

When you dispose of capital assets, you only report (and pay tax on) the portion that you dispose of.

 

As an investor, you need to be able to identify which assets you dispose of. You'll need to choose the portion you're disposing of, whether that's a set of crypto you purchased this week, or in 2017.

 

When you cash out $150,000, you need to work out how much of that crypto you're disposing of. Say it equals 40 of one cryptocurrency. You need to work out when you purchased that crypto, and what its value was when you purchased it. You need to work out other costs associated with its acquisition and maintaining it, too. These costs form your cost base (which you take from your profit to work out your total capital gain). This means you're only paying tax on the gain of the amount you cashed out.

 

To put it in a more tangible example:

  • You buy 50 trading cards in 2017 for $500 total ($10 each).
  • It costs you an additional $50 for broker fees and transfer fees into your name (an additional $1 per card).
  • This brings your cost base to $11 per card.
  • You buy another 10 trading cards in 2019 for $110 ($11 each) with the same broker and transfer fee ($12 total each).
  • You then sell 10 cards in 2021 for $500 total. You choose to say they're the cards purchased in 2017 ($50 each). You keep the rest of the cards from that time (valued at $2,000 total still) and the 2018 cards too.
  • You only calculate your gain on the $50 each. You subtract your cost base from each card's value ($11). This means your capital gain for each card is $49, or $490 in total. You report and pay tax on that $490.

 

You can use the links below for further assistance.

 

Links-

Identifying when shares are acquired and disposed

Working out your capital gain

Transacting with Cryptocurrency.

Record keeping for cryptocurrency.

 

All the best.

Newbie

Replies 1

Thank for your answer.

One more question.
Since 2017, I had thousands transactions on many exchanges( around 20-ish) with many types of trading like ICO, OTC buying , margin trading ...
Knowing that, I should declare tax for each transation .
if I dispose and can choose the portion which I pay tax on, that means I can choose some transactions which lead to the profit that I need to cash out, and skip other transactions until next time ?
Or I have to declare all transactions and pay tax for part I cash out ?
Because it is not simple to choose some transactions between thousands transations through many years.

Kind regards.

ATO Community Support

Replies 0

Hi @DK89

 

Each time you dispose of a cryptocurrency, even if you use that disposed income to purchase other crypto, this is its own capital gain event.

 

However, when you're doing so many transactions, you'll more likely be a trader, rather than an investor. If you're an investor, you work as a business where the crypto is your trading stock. You are subject to different rules in that case.

 

At the end of each year, you need to value your trading stock (cryptocurrency). You have three options for valuing your stock:

  • The cost price method
  • The market selling value method t day of the income year.

An increase in your trading stock’s value over the year is counted as assessable income. A decrease is considered an allowable deduction. This means your increase in value becomes taxable income, whether or not you've sold the cryptocurrency.

 

Check the following pages on our website for more info:

Shareholding as investor or share trading as business?

Valuing trading stock

General trading stock rules