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I recently became a stay at home mum (childcare costs were taking up 80% of my pay, so my partner and I decided that it was a sensible lifestyle change) and about 3 months ago I decided to move our, so-far useless, woolworths shares to cryptocurrency instead. I've never had anything to do with crypto before and have just been teaching myself with the power of google.
I have been spending about 2 hours or so a night researching and buying/selling, and have been lucky enough to make our $10,000 into $80,000, just through crypto-to-crypto trading. I haven't put in any other money in, as we can't afford it.
Now I don't see this activity as much more than glorified gambling - the market is so volatile and so much of it is about figuring out general sentiment and just superficial stuff about the people behind the coin/token, and just getting really lucky that I'm buying in and selling at the right time, no different to reading up on the stats in preparation for a horse race and getting lucky when the right horse wins. I've also really enjoyed learning about the technology - a welcome relief from looking after two kidlets every day.
I called an accountant to find out exactly what my tax requirements would be in July, and he has now told me that I would be considered a professional trader (because of the numbers of trades I've made) and that I would not only need to pay for each profit made on the 50+ crypto to crypto transactions made so far, but that my crypto wallet would be considered trading stock, so I would have the asset appreciation considered as taxable income. This is just insane!
We are scraping by on one income in a crappy rental and a car that’s about to cark it, sometimes raiding the piggybank to be able to afford petrol, and now I'm facing a tax bill of tens of thousands of dollars!
I was mentally prepared to pay CGT on a basic money-out minus money-in assessment, and this news has made me cease all trading and has me so stressed out I'm lying awake at night with worry. I've also cancelled our family tax payments (which have been really helpful lately!) and I'm guessing centrelink are going to be knocking on my door come July also.
These rules implying that my amateur trading make me a professional trader, carrying on an actual business, is ridiculous!
As is the rule that I need to pay for each crypto to crypto transaction! Lets say I pay the ATO the $20,000 in tax for the transactions made so far, and then July 1st comes along and the market crashes back to the $10,000 that I initially invested - then that's it - I'm left in debt with the ATO and have absolutely nothing to show for it.
Is the ATO aware of what a disaster their crypto tax policies are? Is there any chance that changes will be made before July?
The system should be encouraging fair payment of taxes and encouraging innovation and initiative - this will do the exact opposite.
I sorry to hear about your circumstances.
I beleive what the accountant said is correct.
I would sell ASAP to cover your CGT liabilities.
I would also see a qualified (in crypto-currencies) Tax accountant ASAP.
Please note that I am not a finacial advisor but given the fact that they come bomb, it may be better to sell to cover most of your CGT liabilities.
Speak to a tax accountant ASAP and work out various what-if scenerios.
@macfanboy I appreciate you taking the time to provide advice, but I don't think cashing out in a panic is a good idea. My recommendation to anyone in my position is to stop trading (to minimise the risk of being deemed a professional trader)
hold on to crypto currencies that you think have good long term potential,
and wait for the dinosaurs in the ATO to clarify, and hopefully adjust, their position.
If the rules remain the same come tax time, then I will be able to reassess my financial position then. Cashing out now means that I lose all the potential profit to be made. I truly believe in the growth potential of my investments.
I have been warning them of this. This is a major problem, you are not alone, thousands of people have followed the same advice and believe that they are only liable for CGT.
I am so glad now that i have had all of my "Trading stock" in an ICO that hasn't hit an exchange yet. So thankfully i have only had a small wallet to actually trade over the last few months!
If they don't change how treat Crypto, thousands of people stand to loose everything.
That does not help the Economy.
As a country we should be taking advantage of this increase of wealth from overseas for the Australian Citizens and bringing as much home as we can. After this tax year it, i can see our share of the crypto market drying up and we all miss out on the benifits in our economy and the tax that would have gone to schools, hospitals and roads!
They won't all last. Only the strong coins will survive. It would be a shame for Australian investors to miss out on benefiting from the market potential.
I just want to pay my tax as a crypto trader. But taxing each crypto to crypto transaction is beyond insane. Most cryptocurrencies cannot be brought/sold directly with fiat money. Having to go through bitcoin will means double dipping by the ATO. If nothing is changed, it will just encourage tax evasion and crypto trading will be done in Australia.
I agree that you shouldn't sell in a panic based on this. You've done well for yourself with your investing/trading. Hopefully the ATO will look into crypto in general and make some sensible rulings. If you haven't seen it, Whirlpool has a more comprehensive thread on this...maybe it'll help.
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