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Assistance on Cryptocurrency Tax

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Are you able to assist with these questions regarding crypto to crypto trades?


A. If I was to make a profit but not convert to FIAT – would this mean that I’d be liable to pay tax on the profit even though I haven’t converted to FIAT?


B. What would happen in a scenario where say I’ve made a large profit on a coin which has no trading volume (eg. $100,000 profit) but say trading volume is only $10,000 in a consistent 24 hour volume, would I be liable to pay tax on the $100,000 even though there is no chance I could convert this to FIAT?


C. What would happen in a scenario where I have made profits on June 30 (EOFY) and I was hacked of all of my coins on July 1st? Would I still be liable for tax?


D. Expanding on this scenario – what would happen if I was to make a profit on June 30 (EOFY) and haven’t converted to FIAT, then on July 1st my coin crashed 90% - this could potentially put me in a hole of debt from a taxation perspective?


Looking forward to your response.






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I think an answer to a couple of these is that you're not recording what price you could sell your cryptocurrency at, but as I understand it you're just recording what you paid for the cryptocurrency you're currently holding, which helps determine the value of the cryptocurrency you just sold (disposed of to obtain this new 'asset) and thus... when going back to the transaction of where you aquired that cryptocurrency you're now disposing of, and figuring out how much that cost, the Capital Gain is inherent to that.

So... A (buy doge from btc) B (buy ltc with doge) C (buy omg with ltc).
You're asking about the implications of the price of your omg (at the moment or EOFY) which I don't think the ATO cares about. Instead they want to know B vs C capital gain or loss, and A vs B capital gain or loss event, for taxing the increase in value of your asset you were holding as it changed from one coin/token to another throughout. The points of sale track moments in time where you can snapshot a record of your progress as a trader.

THEN. In the end, your overall sum capital gain or loss for that financial year, SHOULD (I hope if my theory is accurate from what people have said here), be identical to if you compared your entire AUD spending + AUD gain + Asset Value... at time of purchasing it -- rather than ... price 'now' or EOFY.

Please someone tell me i'm right, or I have no idea anymore.

It would be more convenient to get a EOFY asset evaluation of all held crypto, rather than figuring out every single trade, but just as prone to errors. More convenient because you only need to price check once for all coins (which many 'portfolio' apps can do in realtime), instead of going back and figuring out the many many different purchase dates and ammounts that sum up the 20 coins you now might be holding... 

Sure 20 coins right, only need to figure out when I bought them each, that is 20 purchase dates? nope... this is potentially thousands of transactions, summing up the coins i'm now holding. Considering I rarely ever sell out completely of something and always, sell bits off at a time to buy different things at different times. Yeah... EOFY evalution would be AMAZING. If only we were so lucky.



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Are we going to see a response from the ATO?



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Hi @ATOcryptoKILLER and @treefairy


We can help you find general information here on the Community, based on the info you've given us. There are different ways of accounting for income from cryptocurrency - if you're an investor, then you'll need to declare any capital gain or loss you've made on your transactions on your return; if you're in the business of crypto-trading, the proceeds from the sale of cryptocurrency held as trading stock in a business are ordinary income, and the cost of acquiring cryptocurrency held as trading stock is deductible.


As an investor in cryptocurrency, you'll need to work out your capital gain or loss each time you dispose of your cryptocurrency - whether you sell your crypto for fiat, trade one crypto coin for another or gift it to someone else. Have a look at Capital Gains Tax on Crypto currency to find out how capital gains tax is calculated and applied to your income. 

With respect to the theft or loss of your cryptocurrency, you may be able to claim a capital loss if you lose your cryptocurrency private key or your cryptocurrency is stolen. However, you would need to be able provide detailed information to support your capital loss if we ask for it. 




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@AmandaE  Thank you, I have read all the responses I can find, you're very helpful, i'm slowly getting the idea.

To clarify: "if you're in the business of crypto-trading, the proceeds from the sale of cryptocurrency held as trading stock in a business are ordinary income, and the cost of acquiring cryptocurrency held as trading stock is deductible."

Is this differentiating then, that a business will detail the selling of cryptocurrency to AUD as income, and then use EOFY evaluation for the trading stock they are holding? Where as an investor uses Capital Gains method of determining AUD value of cryptocurrency trades (realized and unrealized)?

So a business trader, will include all crypto to AUD as income (if profit), then how do they step one) evaluate and then step two) submit the held trading stock value (with costs deducted) ? Is step one) via one of these three methods:

1) Cost price (All the costs to get your stock in its current condition).

2) Market selling (As if it were sold in the normal course of business).

3) Replacement cost (Valued on the final day of the income year).

My issue is... in my mind I just trade Cryptocurrency. I am not an investor or operating a business, as in a cryptocurrency exchange everyone is selling to everyone and the only people running a business are running the exchange and taking the fees (not to mention probably trading with user inputs but anyway).

But if the ATO considers regular and numberous trades as business-like trading of assets, then yes, I am not an investor, I am a trader -- as I mostly spend time looking for trading opportunities, and only hold coins for a long time if they havn't paid off, to avoid cementing losses.

So can you clarify that for the business of trading, unrealized gains are considered trading stock where-by I can then use an evaluation method listed above, concerning (cryptocurrency as) trading stock?

If I claim i'm a hobbyist, a business or an investor... no matter what I feel forced into claiming I am, i'm going to feel like a criminal, because at the end of the day I feel like I need to defend myself and prove to the ATO that I am what they have forced me to be (something I don't understand). I'm just trading cryptocurrency... and I need you to tell me how to be taxed... so yes, I will call up and then someone can figure out my situation for me is the best option. I've pieced together the best picture I can and this forum has been really helpful, educational and a positive step to de-stigmatizing trying to bring money into Australia from the cryptocurrency boom.