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Desire to pay tax, but seemingly impossible feat to work out obligations.

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Newbie

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Replies 5

It seems there's a lot of people that have gone under the assumption that it's only when you "cash out" into fiat that you then pay tax... because that makes sense. What would you recommend for people that have made hundreds upon hundreds (perhaps thousands)of small trades over the year on multiple foreign exchanges and only now realise they have to tally up CGT for every single disposal? Many exchanges don't keep proper records, or the formatting makes it extremely difficult to work out. Some exchanges only keep records for 3 months. 

 

It seems like an impossible task for the average Joe. One would have to work out the exact price of the two altcoins being traded at that moment perhaps six months ago (for hundreds and hundreds of transactions). I don't believe that's possible. The prices between exchanges at any given moment can be dramatic. There's no software that I know of that will help you with this. The few websites I know of that claim to make this process easy have many faults (don't work). It's not like you're trading with stable fiat.. you're trading on a psychotic seesaw of multiple currencies that go up and down wildly from day to day, hour to hour, minute to minute. If you were out at sea 6 months ago during a storm, how difficult would it be to now work out your position relative to the horizon given the swell of the ocean at 6:35pm? Maybe you can, but then you have multiple boats (altcoins) with varying displacements bobbing up and down in multiple oceans. Probably a bad analogy.

 

I'm also a little confused as to why purchasing X altcoin with Ether, for example, would be considered a disposal when you can't purchase it directly with fiat. Most altcoins overseas you can only purchase with other altcoins. If you buy Ether in Australia to send overseas in order to buy an altcoin perhaps so you can then buy another altcoin on yet another exchange, you can see how things start to get very tricky in terms of keeping records of such! The amount of transactions that take place can be astronomical even in just desiring to purchase X amount of X. 

 

Sometimes there might be a traffic jam in terms of processing ether or bitcoin transactions and by the time you have sent your bitcoin from one address to another the price might have jumped significantly. Would that be considered a CGT event? This might happen often.. how would one be able to determine the difference if looking at records from six months back? 

 

It seems like there's an awful lot of confusion not only from good citizens on here that want to do the right thing, but also from the ATO itself. We're all in unchartered waters yet, for the average Joe, they must feel threatened and utterly overwhelmed. They might find themselves getting taxed for "gains" made in January (market high)that they never cashed out on, and now the whole market has died. It's not like they can go to an accountant who will sort it out for them because even if the accountant is familiar with crypto, the amount of time it would take them to work out CGT is completely impractical (that's if they even can). 

 

In my view, it would make more sense to make it easy for those who want to do the right thing to simply pay on whatever they sell out into fiat. Have a flat rate (forget about CGT discount etc, make it lower, encourage people to actually pay). I don't think it's reasonable to compare crypto to stocks, as it would seem crypto is far more complex/risky. It's the wild wild west. Those invested are for the most part not stock brokers. They're just regular people who probably got frustrated by inflation eating away at their savings in the bank. Perhaps they wanted to get their money out of fiat because Australian banks are utterly overinvested primarily in housing during a housing bubble (a disaster waiting to happen). They're expected to work out and report on something infinitely more complex, even though the ATO seems to still be trying to work out how to approach crytpo itself. To consider crypto that hasn't been cashed out but simply swapped for another a CGT event seems absurd.

 

Crypto moves far too fast to simply "hold" onto any one coin for 12 months (for CGT discounts). It's far too risky. Yet, they're encouraged to take that risk due to CGT. If the person trades with CGT in mind, they're probably going to lose out long term.

 

It's almost as if those making the guidelines related to taxing crypto haven't actually traded crypto themselves. 

5 REPLIES 5
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Newbie

Replies 3

The problem is many if not most of us trade on foreign exchanges far removed from fiat currency. There is no conversion from AUD, and often not for any other fiat currency. The value of the coin you traded six months ago is not recorded against fiat, but some other crypto (maybe btc, eth) which both could be worth +/- 100-1000AUD depending on the hour of that day. But then that same amount if attempting to sell on an AUS exchange for AUD is worth something completely different. You're pretty much guestimating at actual value in AUD.

There's no liquidity on Australian exchanges so you trade overseas.

Another problem is that someone exchanging X token for Y token is expected to pay fiat CGT even though it has nothing to do with fiat, is in no way linked, and is still at great risk of losing value. There is no real gain in crypto to crypto. The only gain of any practicality is a gain into AUD. Until then, your portfolio has little to no real world value as far as taxation is concerned.

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Newbie

Replies 2

"If you buy Ether in Australia to send overseas in order to buy an altcoin perhaps so you can then buy another altcoin on yet another exchange, you can see how things start to get very tricky in terms of keeping records of such! "
In this example, I'd expect that this is the position a lot of people are in. They weren't trained to be "traders".. a lot of people that have never probably had enough money to buy shares have found themselves buying crypto. The initial amount of learning involved even to keep your crypto from being hacked is fairly steep. Is the average person really thinking about CGT on individual nonfiat transactions when they first buy in? No, they're probably more focused on trying to work out the difference between pos/pow or what 2fa is. They then get onto an exchange like bittrex, get sucked in by the hype and think maybe they should trade btc for some other coin. In their mind they're swapping x for x on some overseas exchange, unaware that they now owe the government fiat money they probably don't have. Have they at that point even made a real world profit that's not at high risk? No.

They realise 6 months later that the gov wants cgt, but in going over the records that vary greatly from exchange to exchange and likely don't correspond in value to AUD, they give up. For every single transaction, the precise real world equivalent AUD value is impossible to work out. They can't work it out. If an accountant could work it out it would cost a fortune, but good luck trying to find one that understands crypto. So what do they do? They don't pay.
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Newbie

Replies 1

If different altcoins are purchased throughout the year in smaller amounts under 10,000, but in total you have purchased above 10,000 in all crypto, is that still considered personal use?

If you invested with the intention of trying to shelter your money from inflation/strong potential for economic crash, how is that taxed? You're not investing to make a profit or for day to day expenses but rather as a store of value you consider safer than fiat (can't be printed). You've diversified your crypto portfolio merely to lessen the chance of a complete loss.

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Devotee

Replies 0

Don’t all these chains have transactions with your account number in them? Could you just get the chain and search for where your number was used.

And if you can’t sounds like you’ve found yourself a business - “Deep Water” (the crypto transaction divers!)
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Community Manager

Replies 0

Hi @cryptoconfusion,

 

Thanks for your continued interest in cryptocurrency, we’ve been working hard with our specialist areas to get the answers you’re looking for.

 

We’ve recently updated our Tax treatment of cryptocurrency web content to provide additional advice, but we’ve started a consultation process to obtain feedback from the community on:

 

  • record-keeping as it relates to cryptocurrency transactions, and
  • exchanging one cryptocurrency for another cryptocurrency

 

We’d love to hear from you! Join the discussion and have your say by going to our Let’s Talk consultation page before Friday 20 April 2018.

 

Thanks, BreeH.