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Net loss declaration with cryptocurrency

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Hi all, I've been looking at various websites for information regarding cryptocurrency tax rules, and I understand the way to calculate a net gain, however, I'm slightly confused about what to do when it comes to a net loss. 


For example:

I have $1000 sitting in an exchange and I spent it on 1 ETH. Let's say one day ETH crashed and I sold my 1 ETH for1 LTC ($250 at that time), this event resulted in a $750 aud loss in value. Over a period of 5 weeks, I conducted 4 trades with my newly acquired 1 LTC, each gaining 7% at a time. In total, I now have 1.28 LTC. For simplicity, let's say LTC value remained the same, I have gained an equivalent of $70 (0.28*$250) from my trades. Therefore am I correct to say that I have made a loss of $680 therefore, I don't need to pay any tax? Furthermore, is it necessary to declare a loss? I know that if you declare a loss, the amount can be used to offset any gains in the future year. However, what if I just leave it and declare a gain against the initial $1000 when I sell it eventually, am I breaking any laws?






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Can your capital losses carry over to the next year if you never declared them? Good question. Don't forget fees add to the cost base, of each trade. 


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You have made a $750 loss.

You will not make any gains/losses until you trade/sell the other currency.



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Also I think losses only carry over if you're 'operating or in the business of cryptocurrency trading', but then you're not using CGT, but recording your profit to AUD as income and your held assets as trading stock.

I mean ... i've been on this forum for a couple of weeks now and I have 90% more info and a solid idea of what is happening with taxing crypto. But the more questions I have answers to, the more confused I am about what i'm meant to be.

If I calculate my CGT then i'm lying about being an investor, when i'm actually a trader. And if I claim i'm a trader and use trading stock method to account for my assets and to list my profit as income... then I am lying about running a business when I don't have a business or ABN. So what can I do? How do I declare my cryptocurrency to the ATO without breaking their stringent classifications?

This is my hobby while i'm studying full time... i'm still putting together a huge spreadsheet of all my trading info (EtherDelta still won't load certain blocks for trades or deposits withdrawals, so i'm unsure if I have everything (at an impasse) anyway). But once I get it all together, which method of profit/gain analysis applies to me? 

Because without knowing that, the question of how to declare a gain OR a loss... is unanswerable.


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Hi @Taxnewbie1


Welcome to Community! For the most part, calculating your capital loss is similar to calculating your capital gain. However, there are a few of important points to note with capital losses


  • @treefairy's right - you'll need to work out your costs to calculate the cost base. However, capital losses use the reduced cost base to get an accurate reflection of the actual loss.
  • Capital losses can only be used against capital gains - you can't use a capital loss to decrease other income like salary and wages. As you mentioned, you can carry capital losses forward until you can use them against a capital gain. 
  • Once you have a capital gain, you must use any carried forward capital losses immediately, even if you can't use them in full. You would then carry forward your remaining capital losses until your next capital gain. 
  • Capital losses can be accumulated over time, so if you have another capital loss next financial year, you'll add them to your existing capital losses to carry forward. 
  • You don't include a discount on your capital loss calculations - you get to carry forward the entire capital loss. 
  • There are certain capital losses you must disregard - for example, losses from personal use assets. These do not get included on your return at all. 

We have a CGT record keeping tool on our website you might find useful - you can choose to link the tool to your online services account in myGov and then upload any data you enter straight into your tax return. myTax will use the data from the tool to calculate your total capital gain or loss on your behalf. 


Find out more on how to report CGT in myTax over on our website. 


Hope that helps!


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@macfanboy$750 if I don't sell and $680 if I sell my LTC right?


Hi Amanda, what about this scenario? 

Let's say  I bought10 LTC at $10 per coin and I sold everything for $50 because it was dropping in price. A few days later I bought everything back for $40. My intention was not to dodge tax but to increase my holding during a down trend eventhough my $$ is going down. So long I don't declare a lost I haven't done anything illegal right (wash sale) ? As well, would my new cost base be $90 ($100-$50+$40)?


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@Taxnewbie1 wrote:

@macfanboy$750 if I don't sell and $680 if I sell my LTC right?


Hi Amanda, what about this scenario? 

Let's say  I bought10 LTC at $10 per coin and I sold everything for $50 because it was dropping in price. A few days later I bought everything back for $40. My intention was not to dodge tax but to increase my holding during a down trend eventhough my $$ is going down. So long I don't declare a lost I haven't done anything illegal right (wash sale) ? As well, would my new cost base be $90 ($100-$50+$40)?

I think you are looking at the smaller picture. They want both, they want all your records. You will need to figure out capital gains on everything to determine your present situation.

Basically they are stressing with CGT you do not record the value of your assets/cryptocurrency 'now' or on some particular date... you need to record their cost .. as their cost base... which is the price you got for what you disposed of. 

If you had 100 AUD worth of LTC (sure record the number of LTC but)... how much AUD worth of assets do you now have? You don't just jump to where you are now you need to show a working spreadsheet of.

1. Bought 10LTC spent x, time/date on y-exchange 2. sent to x-exchange on date/time, amount, fee, fee currency, fee cost at that time. (fee adds to cost base of 10LTC, as your asset has been reduced, so it cost you more for less LTC) 3. sold 10 ltc for 50AUD, on x-exchange on date/time, fee, fee currency... etc

You are now carrying a capital loss of 50AUD from your original spending of 100AUD... you will not be in profit until this is cancelled out/claimed against. You buy 10 LTC for 40AUD... of the 50. If those LTC go unsold, then they continue to cost you and be worth 40AUD, so you still have 50AUD, so your capital loss is still 50AUD from the original 100AUD -- 20% held in cash AUD, 80% held in cryptocurrency.

Your cost base for the new 10LTC is 40AUD. If they increase in value to 90AUD, then your 50AUD capital loss is cancelled out and you're even.

90AUD (in 10 LTC) + 10AUD in cash = 0 against spending of 100AUD. 

The fees just explain why you don't actually have 10LTC, but 9.998LTC. And by accounting for them you get to add them to your cost base, as it will depreciate how much you could have got disposing of 10LTC instead of the 9.998LTC instead.

Every trade is 'new' assets for 'disposed of assets'. Every LTC is unique on the blockchain, it is a new gemstone. You trade 10 gems worth 100AUD, for 50AUD... because they aren't shinyer than 50AUD in your imagination. On no wait you want some gemstones back... you get 10 for 40AUD, if only they were worth this much when you had 100AUD and didn't just lose 50AUD, bl.. or you'd have more gemstones Smiley Tongue

Make sense?

Actually your fees don't 'add to your cost base' i'm sorry, they just depreciate the ammount of cryptocurrency you have (unless the fees are paid in fresh AUD). The reason you want to add your fees, is because in the end... you will want all that dust accounted for. I have like 500AUD in profit, and I have paid 1600AUD in fees. If I didn't have records for all the fees paid, it would look like i'm still holding all that cryptocurrency in my accounting... so you'd be paying tax on money you've already shredded into fees (ouch).


p.s. Your trade isn't a wash, you just got out early, and decided to buy the dip. Saving yourself 10AUD... getting your 10LTC back cheaper, it is called trading. You're still missing 50AUD. 

I mean what do you have now? You have 10LTC and 10AUD spare from 50AUD you got for 10LTC... what you don't have is the other 50 from the 100AUD you spent on 10LTC originally. Capish. If you put the 50AUD in your wallet and got out a different 50AUD dollar note, that isn't going to change the fact you have a loss from capital depreciaion/fluctuation/disposal of 10LTC.

(in simplest terms possible, you sold 100AUD for 50AUD, through buying an asset and selling it again at a loss... that's all the ato cares about until you sell the LTC you bought back again, they don't want to know you have it... because it isn't worth anything until you sell it... but for future reference the cost base of the 10LTC you have now is 40AUD (of the 50AUD you claimed back in AUD). but being over all at a loss. your cost base isn't still 100AUD because in their eyes you have 50AUD back again, even if you know you're holding 40AUD of that in cryptocurrency... and 10AUD in cash. and if you're confused about the 10AUD still... basically... it just means no matter what, you will not have a loss more than 90AUD if you keep that 10AUD in cash, not cryptocurrency. even if in the real world you will spend it on a pie... CGT for the purpose of this exercise is just cryptocurrency focused in your accounting).

the concise answer is:

would my new cost base be $90 ($100-$50+$40)?

no your cost base is $40 for the assets you have, and you carry a $50 loss on assets you disposed of in the past. $10 is in tha bank or stomach.


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I think I'm starting to understand more about taxing with crypto. So how many coins you hold doesn't really matter, what the ATO is interested in is the AUD worth when you bought and when you sold. So essentially, changing my example slightly if I bought 10 LTC for $100 and sold it for $50 and then bought 12 LTC again for $50. I've made a loss of $50. My new cost base is going to be $50 eventhough i've gained LTC as ATO only cares about the AUD worth. I guess in a way I can think of the new cost base as $100 as I have the $50 loss which is carried over (it's easier for me to calculate profit/loss this way haha). What bothering me is whether the declared $50 loss would be seen as a manufactured loss to reduce future tax... 


With regards to fees (depending on the exchange), I read somewhere that the cost you paid to acquire an asset can also be added to your cost base. True?


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the loss isn't manufactured, because the value of your asset is determined at the time you acquired it, which also determined the disposal price of the last asset (which determines your capital gain or loss). your new asset has no capital gain or loss, until it is diposed of, it just has a cost-base.

yes the fees reduce your capital gain. in reality and in your records .. your records should match reality. the only time this differs... is the change in your asset between when you aquired it till now (not having disposed of it)... you might be at a loss now, declaring a gain... on what your capital assets were worth when you got them.. which only means you will be declaring a loss when you dispose of them if the situation doesn't improve.

but people don't want to keep paying tax/money on money they don't have, in assets that might never generate income... so your eventual capital loss might only ever be offset, if you have a business.. so you've been paying tax all along for an eventual loss... but that eventual loss gives you nothing in return from the ATO. because you only gain at best a deduction off future tax, not a credit for tax paid in the past.

you can put it that way, but in reality the ATO still wants to see the amount of cryptocurrency you have... because that does determine the value of what you're holding. ... they just don't care the 'value' of what you hold now, they can still see and know what you have now, by looking at the capital gain on what you disposed of to get it. it just doesn't factor into your CGT until you dispose of what you have now, so it will only be in a future tax return if you dispose of it (for AUD or another cryptocurrency)... if you don't dispose of it for 12months, you get a deduction on the capital gain of 50%.


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In short, you had 300 money, but you converted it into assets.... through trading that asset for other assets of the same type, you managed to change the value of your 300 money to 3700 money. Your 3400 asset value increase, is a capital gain, that adds onto your income tax... and increases your tax overall if you get put in a new tax bracket because of it.

The distinction is they are counting asset value, as income -- when in reality you don't have the benefits or security of AUD, to spend it in the same way (until the future happens and it acts more like currency, then who ever accepts it as payment needs to worry about CGT not you until you spend more than 10k of it on personal use).

But as soon as you sell your Cryptocurrency to AUD, you gain the benefits of AUD... whilst cementing in place your Capital Gain, from the change in perceived value of your asset, in an open marketplace (supply and demand and all other factors coming into play)... it is your risk and you are undertaking the risk with the belief you will profit.. and the ATO needs to tax any profit you make, as you're in Aus.

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