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I am seeking advice regarding available avenues to organise class action or other legal proceedings to challenge the ATO's determination regarding the treatment and taxation of crypto currencies.
I find the ATO's approach to cryptocyurrency taxation unfair, unbalanced and will lead to massive losses that may even put many people in debt because of its shortsight and inability to understand and address a complex matter in a reasonable way.
1. How are people being taxed for an asset that is neither regulated nor protected? I personally know of many Australians who have been swindled out of hundreds of thousands of AUD by an Australian registered crypto exchange and each and every government body which was approached for help did not provide any support from ACCC to ACORN to ASIC to the Police to Consumer Protection bodies.
I am not a lawyer but how is the government demanding taxes from an investment they did not support or protect but rather investors and traders had to take multiple extreme risks with their hard earned savings to make some profit against all odds.
2. The rules for shares and capital assets are not designed for crypto transactions
The ATO argues that, since 2014, determinations were made regarding crypto being considered as a capital asset and may undergo similar treatment to shares. This determination, in my view, is not appropriate because of:
2.1 micro transactions and small value: The rigor of accounting for share trades and capital asset gains is not reasonable when considering the hundreds of micro trades which are normally performed for very small values of crypto trades
2.2 ownership complications: I would think that to be taxed on gains from capital assets there needs to be proof of ownership of assets. Most crypto is either created through mining or bought from people or exchanges, none of which normally produce tax invoices, or operate within contractual foundations which enable approrpiate recognition of owenership. Considering that crypto tokens are part of a larger block chain, can it not be argued that the money is still on the block chain itself and not in the position of the person who bought it? can it not be argued that wallets on exchanges that are created by exchanges belong to the exchanges?
2.3 public awareness, poor tax advice and low governance: creating and trading in crypto does not have the same governance and requirements as shares and capital assets in relation to entry such as age, location ....etc. So, in turn, you have people who have acquired crypto from all age groups, including underage children, and from various places from around the world with no proper informationa and guidance from the ATO regarding their tax obligations. The ATO's documents in 2014 were, at best, vague and generic escpecially that it did not consider all the scenarios to which it may have been applied. Tax accountants weren't trained or ready either to interpret such determinations.
2.4 Like for like in capital asset and shares tax laws was not made for crypto
While as exchanging shares for other shares is possible, exchanging houses for other houses is not so common, yet, exchanging crypto for other crypto is extremely common and for very small values. Furthermore, because both realestate and share markets are properly regulated its easy to get AUD historical values, but exchanges in Australia are not regulated. It is not of the same nature as the other tax treatments which the ATO is forcing people to apply.
2.5 What about banks which froze crypto trader accounts?
Several Australian traders and exchnages have had their bank accounts frozen and banks have won cases against those people saying its within their rights to do so. How is it fair that the ATO expects people to pay tax within such a high risk environment when there is no regulations or government support to protect their assets?
3. Difficulty of accounting and inaccuracy of ATO claims following Speak Up
The best of software out there will struggle to deal with the variety of data sources, dates, base crypto costs ...etc. I believe the ATO did no real life testing of the software they claim to have found because there is no software out there that can seemlessly and accurately handle ICOs, Interest, Chain Splits, Drop Tokens, Limit Trades, Leverged Trades and update this information for thousnds of micro trades without issues. And exchanges do not provide all the data needed including transaction fees. This provides for horrible calculations of realised and unrealised gains which doesn't match up.
4. Taxing nothing
Because of the above issues, many people who have been trading crypto had unrealised gains in previous years from 2014-2017 which they may not have cashed out but , in the ATO's view is still taxabale because crypto to crypto trades are deemed as a disposal, but now that crypto prices have dropped, the ATO has caused, with their unreasonable determinations, the following:
4.1 People need to revisit their tax returns for prior years to add up the unrealised gains which they never cashed out and pay tax over money they never received. Arguments that in this financial year losses would balance out the unrealised gains in prior years is absolutely unfair and ridiculous because taxes for prior years still need to be paid and to do so people need to dispose of all their assets, borrow, beg or declare bankrupcy to pay up taxes for money they never received and were never told they would be taxed on!
4.2 The arguments of trader vs investor add to the confusion and ridiculousness of the situation. If people, who hadn't accounted for crypto to crypto transactions in prior years were deemed a) as investors they will need to pay for money they never received b. get negative CGT for future capital investments which they may likely never benefit from because they have no money anymore to acquire any assets int he future let alone make any Capital Gains. and b) if deemed traders then they lose on the ability to even claim expenses because they were never aware that they needed to keep records of expenses because it didn't seem reasonable that sitting in their home offices trading crypto to crypto without cashing out would every lead to any tax cash payment implications.
There is a lot of interest at this time in investigating how the ATO has stiffled small and medium businesses and this is situation , in my view, is even worse!
I think what would be fair would be:
1. no taxation of crypto to crypto transactions
2. no taxation of crypto before ensuring Tax Accountants and ATO advisors are properly trained on crypto taxation, regulators are protecting people's crypto assets and there are controls related to age, and awareness of risks prior to entry into crypto investment/trade
3. within that period ATO needs to test and try all scenarios of taxing crypto, work with academics, regulators as well as customer focus groups, not the SPEAK UP which was used to silence critics and just give the illusion of consultation
Please let me know what are the available avenues to contest these determinations and how crypto is being treated for taxation purposes particularly crypto to crypto trades in light of the above.
I can't answer your questions. But I can say that there's a lot of good points there. Especially #4. All questions about this so far have ended an indication that the ATO is being either negligent or malicious in dealing with this. Also add the case of ICOs not being delivered on time and come tax time, it's uncertain whether it's a write off last year or not.
They should at least let people do their tax return in July 2019 going back to the beginning. This would be the least they could do. Ideally though, cash in vs cash out accounting with a flat rate like France would be best. But this is Australia and we're not property investors so you know exactly where they will tell people to go. A class action would be a good idea. Would be nice to know how you're progressing in finding out info about it.
you can pay lawyers for anything these days, especially for an upfront fee of 1btc with no garuntee of any success in recovering your 20 bucks. lol just talk to silver and miler.
but yeah i've slowly lost motivation with this... I've been on here a lot trying to learn what I need to know to get my first 'over the tax free bracket' tax return done. I got an ABN. but now the market is so dead, and i've lost interest in focusing on it due to my full-time study in the arts... I just cannot be arsed going back through all my thousands of transactions, trying to figure everything out in AUD.
I spent 2 months using coin tracking entering raw data, until I realized some of the dates were USA time and didn't convert properly (months and days) to AUS time.
Now it is a lot of effort to put in... to pay tax of any amount I cannot afford, in money I don't have... (it will be aus-study, used to pay tax) and the only option would be as a trader, if I even care to think about it like that, would be selling at the very bottom and short changing myself in the worst possible pay. like in the last month... my 10k has become 5k, and my next semester will cost more than that. so HECS wins with some compounding interest being my foreseeable future, paying indexation nobody wants to just be honest and call interest.
I've lost all motivation, and only really dug myself a grave by trying to do things properly so far, and contacting the ato for a ruling didn't help at all because they didn't really understand any complexity of what i'm facing.
I was asking about trading records I cannot access and they told me to just put the price at the time from a reputable exchange, but how the hell would I remember the hundreds of trades from that exchange, times/dates amounts or even what I traded... to go hunt up an AUD equiv price elsewhere. I'm just trying to do the right things, and in the end it isn't going to be worth it.
On the other hand I can see their motivation to rush rules in place with the sudden surge and serious cryptospace has gained. It is just sad to see a supportive approach turn into one of the harshest taxes on cryptocurrency in the world.
I personally think CGT works for me now that I understand it. I'd rather add up my spending from my bank and my sales back to AUD + the value of all my cryptocurrency on June 30.. as that is the quickest and most accurate way to determine my Capital Gains... but I also understand why I need to keep and track all evidence of how my cryptocurrency changed and was traded and how I operated my business... so I can show and they can see there is no fraudulent or illegal activity.
My issue is I like being thorough and I cannot afford an accountant, so I worry over every discrepancy and it is very complex collating information historically from 8+ exchanges. I worry if I'm not 100% accurate even if I cannot be, then I will be in trouble with no way of fixing it. My task is not simple, but I want to do it properly, I just struggle to wrap my mind around it all. But once I learn it, this will get easier each year and it will work out in my benefit in the long run.
I appreciate this forum and the ATOs willingness to talk openly about the requirements and all the considerations they have taken, they have made every effort to lay out the concessions and how-to. But as i've said, cryptospace makes the complex simple, so simple minded people can use it, and this system (tax) often makes the simple seem very complex.. so it is an mishmash at the moment, until some clear video tutorials come out concerning the topic of cryptocurrency tax and how to not stuff it up!
Personally I wouldn't think of taking legal action as I don't think they have been overly negligent, it is more just teething problems and the uncertainty (fud and fomo) of cryptospace spilling over into making it a grey area. It was a bit last minute/rushed sure.
Any day a case could come out where crypto is used in a nefarious way that painrs the emerging industry in a light nobody wants to associate with, so I can understand the hesitation to come across as for or against... pro or supportive overly. But Australia does have great interest in making this a simple transition for users to make (cryptocurrency + tax) because good traders who are supported and can make decisions with confidence, will bring in more money from this global pool, inevitably being taxed in every number of way things are.
It is a bit rough to have to sell off your business stock (crypto) to pay for a tax bill that reflects your asset value 5months from end of financial year. I think another method is needed for common people and small business.
Like.. the nature of this beast is... you hold when you don't want to cement a loss in place... so you trade when it is high and exciting to get into things, but when it drops usually we just hold... as it drops and drops.. but holding means not triggering CGT events... so our value is stuck at unrealistic prices that can end up with a tax debt you might not be able to pay off for a whole year even if you sold everything you have.
I think the ATO needs to promote and explain how to apply the trading stock methods even if you don't have an ABN, create a new classification similar to 'trading stock' methods, like 'replacement value'... but so that people can give a more accurate and truthful account of their capital gains profit/loss... a way where we do our CGT running profit and loss for every trade, but we can trigger an event as if we sold on June30, without being forced to... and then we can declare closer to the true value of our assets EOFY.
It isn't realistic to expect us to go around and sell 200 different assets, and pay all those fees... and maybe make capital losses if it changes by the time we buy them back... just because we aren't allowed to write down an 'if we sold it would be worth X based on the live price on june30.
I think that is very fair and is more in line with what the ATO wants, a truthful account of our Capital Gains that reflects our true financial situation, that doesn't collapse businesses and allows for a true taxation to apply to real asset value/profit.
the point is... it is getting more popular, more common place, and it is like stock trading but accessible, open, easy and appealing to common people... simple people and even kids. my 5 year old nephew could trade if there weren't imposed age limits it is that simple.
the next main point is... people who get nothing from claiming capital losses when their income isn't usually over the tax free threshold, the way it is promoted and explained and the law put down colloquially in answers here is... "you may be taxed 5x more than the value of your assets on June 30 if you don't force a CGT event by paying exchange fees for each of your assets, which is money you may never get back, even if you get to declare the losses the next year, including the cryptocurrency you were forced to sell at a loss, to pay part installment of this tax bill, corrupting your budding small business".
simply because options aren't simplified...so that June30 has an option, to write down an 'if I sold my capital asset it would be worth X and this means my capital gain IS on June30 SUM/realistic'.
I think an 'if I sold' option needs to be put forth just for cryptocurrency, like the trading stock method but with more concessions suiting simple traders/hobbyist and small business sole-traders. supporting the cryptocurrency ethos and ecosystem, where traders don't think like business investors, but just do it because it is easy enough to fulfill their curiosity. a more casual approach is what should be lobbied for I guess, to suit the casual nature of it.
(just clarifying the issue).