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Hi, Excuse me if I am asking something that has already been mentioned before. I have gone through a bit of the forum and the main site but I am still somewhat confused to what my situation is.
I have ERC20 tokens which I exchanged for Bitcoin.
Say, for example, I hold 1 BTC which right now is at $9,164 and in this example I used 0.25 BTC in exchange for AUD for personal use.
How would tax be declared in this situation?
Would I declare 1 BTC as tax or is only the BTC->AUD exchange taxed?
All trades between all currencies are a Capital Gains Tax Event.
So trading ERC20 tokend to BITCOIN is one CGT Event.
Then Trading BITCOIN to $AUD is another.
scenario one that works out the same as scenario two:
Simple... you spent 800 aud on crypto... 1 year later all your crypto is estimated to be worth 1 btc (200 crypto currencies tracked by blockfolio or some live trusty app)... 1 btc is work X end of financial year... you get taxed on profit, easy right?
Well sure, you get taxed on profit but have absolutely no accounting or records to show the ATO from how your 800AUD became 1BTC... so you have shocking business etiquette or are a scam artist. So how to rectify this? Well you need a running profit/loss statement... like wedgewood invented for selling his pottery wares and trinkets to keep track of how much est. his money has become in assets not yet sold or sold.
Scenario 2 (the way ATO wants)...
You spent 800 AUD... at one time to start with for ETH... and trade it directly to ICO... or live tokens riding the eth chain (erc20 atm)... the price of eth hasn't changed... or has slightly so lets say... you dispose of it when it is now woth 799.50 worth of eth for x-tokens... oh look.. you have a 50cent capital loss.. and a record to show when and how you lost this sum of your assets value. it wasn't just black magic or spent on a lollypop.
So you had 800AUD now you have 799.50AUD worth of Erc-20 tokens...
Now to answer your questions:
1. your assets are perpetually worth 799.50, until you disposed of them for 1BTC...
2. but the most important part is the value of 1BTC at the time you got it... or the value of your tokens when diposed of, as this is identical value.. of you couldn't have traded 1 for the other.
3. your profit and loss is .75 btc when sold (aud value even if for another crypto) compared to 799.50 *(notice not 800 as 50cents already claimed as a soll you're carrying)
4. your .25 btc is a wiped away as a concession because you spent it on personal use items, but you need to document the value of your disposal still.. as there is a cap on this concession for 10k aud worth of personal use items/ or crypto disposed of this way. and you need to keep track of that.. and you can't know when you hit 10k in personal use items if you don't track the aud value of crypto... in your case .25 btc, disposed of for them.
yeah sorry, I just noticed... the concession only applies if you dispose of your .25btc directly for personal use items. if you sold it for AUD, then it is just disposed of in general.
the only concession you will get is not if you buy snacks with the money from selling crypto, but if you spend that money... on setting up your business and have an abn for it and it would go down as a cost.. to offset profits.
see... disposing of your btc for personal use items is essetially giving it to someone for random junk... and the tax burden is also given to them (but you can only do this for 10k worth of certain tax exempt stuff)
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