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Obviously your cointracking clients haven't used the non-tracking sites such as liqui.io, etherdelta, okex etc.. the list goes on. The list of exchanges you can import from is very small.
You can't tell me some uni student who has turned 2k-20k with hundreds of untrackable trades that he should have been responsible and predicted the ATOs crypto-crypto stance before they announced it and kept track of every transaction.
I understand you are coming from a legal perspective here, but in reality this person is not going to spend dozens of hours(and hundreds if not thousands on accounting bills) in order to make sure their tax is reported 100% correctly. They will either just report their crypto-fiat transactions or not report at all. The ATO really needs to make paying tax on crypto simple if they want people to actually pay.
The ATO stance has been the same since at least 2014 , as have the rules for calculations.
I do understand what you are saying and yes your only option is to estimate using a reasonable basis. My suggestion would be come up with a reasonable way to calculate your position submit a private ruling asking the ATO top address it, they'll either come back and give you additional guidance or say they are ok with that. Gives you a much more tennable position. There are myriads of reasons why people lose CGT records, this can actually be a huge issue when you inherit assets so the ATO are by no means unreasonable on the matter.
I do honestly feel for people in your position and I've tried to address that in my submission to the ATO about this matter, however as a tax agent I must also encourage people to understand and meet their obligations. While there are people like yourself who have a genuine problem there are also a number of people that merely can't be bothered going to the required effort.
The ATO stance has been the same since at least 2014 , as have the rules for calculations.
If the ATO's stance on crypto-to-crypto transactions has been the same since 2014 they have done a very poor job of communicating it. The Tax Treatment of Cryptocurrencies guide that they released in 2014 did not make it clear that crypto-to-crypto transactions were CGT events. In fact, a section on Cryptocurrency to Cryptocurrency transactions has only just been added to the guide in the last few weeks. Not only that, but there have been people asking the question on this forum for months and a definitive answer from the ATO has been very slow in coming. There has also been a lot of conflicting information out there on the internet about this which hasn't helped either. The ATO bears most of the reponsibility for this for not making this position clear, particularly because, for the average person, taxing crypto-to-crypto is completely unintuitive, and calculating capital gains can be impractical because of the lack of reference to fiat and extreme volatility.
I went to see my tax agent late last year to ask about how I should handle my crypto holdings and it quickly became apparent that I knew more about the topic than they did. I got the impression that I was the first person to ask about it. So it is likely that even some accountants are going to be poorly prepared for the flood of crypto users/investors/traders tax returns for FY2017-2018.
At the very least, if the ATO aren't going to come to their senses and persist in regarding crypto-to-crypto exchanges as CGT events, there should be an amnesty for this financial year in terms of recording every crypto to crypto transaction (given they have only just added this to the guide), and practical advice provided on specific methods to value transactions which have no direct reference to fiat and which may change by 50% or more over a day.
Every Crypto investor has been dealing with the same thing
I don't think that's true. There is a world of difference between the experienced or institutional investor, and the small-fry inexperienced "investor/trader" who fell into crypto almost by accident.
I have client's with over $1million in crypto investments and the software like cointracking works perfectly well for them, its actually able to deal with everyone of those events you listed.
How does it deal with exchanges that have disappeared or things like Shapeshift for which no transaction history is kept?
If you only deal with a couple of the major cryptocurrencies and stick with the mainstream exchanges then tools like cointracking.info can be useful.
Even then it's not perfect. I'm not a trader myself, but I have made a dozen or so crypto-to-crypto exchanges to purchase various cryptocurrencies to experiment with (I have an interest in smart contracts as a software developer) and as investments on Bittrex. For three of those, for some reason, in my transaction history the time is marked as "######" (i.e. unkown). I'm not sure how I'm supposed to get an accurate value for those. I can probably work out the date of the transaction from when I withdrew the currency from the exchange and use the historical average price for that date. But without the exact time the value might be +/- 50% from the reality given the volatility of the currencies involved. Is that going to be good enough for the ATO?
And that's just for a dozen or so transactions on a single mainstream exchange. I know of people who have made hundreds, or even *thousands* of trades on multiple exchanges over the year. What are they going to do?
If you've done anything exotic, and by exotic I mean use some of the more obscure foreign exchanges and altcoins, as many small time crypto "investors" have (because this is where BIG gains can be made), then cointracking is not going to be that much help.
It seems people think that because they forgot to plan ahead and keep the necessary records they should just simply be exempt or get special concessions.
I'm not sure why you think expecting tax rules to reflect practical realities is asking for "special concessions". I get it that you think cryptocurrencies should be treated like shares. But they are NOT the same thing.
Firstly, there are many more diverse ways to perfom crypto-to-crypto exchanges than with shares, some of which are completely automated and don't require even an account on an exchange. Secondly crypto-to-crypto exchanges are usually made with no reference to a fiat currency, unlike shares. Thirdly, cryptocurrencies are *used* as currencies, unlike shares. Finally, the volatility of crypto is unprecedented. Think of the most volatile stock you ever heard of, multiply that by a factor of 10 or more and you have *normality* in crypto.
In the event that records are unattainable for whatever reason the ATO would simply expect the income or loss still be declared using reasonable basis calculations,
The question then, is why can't we just do that in the first place, since that would be a lot simpler for everyone, including the ATO?
Everyone just seems to be over complicating this matter. There are a number of software solutions that allow you to download your transaction history and it does the conversion for you.
I disagree. It's actually the ATO that is overcomplicating the matter if they are taking the position that crypto-to-crypto trades are CGT events, and I don't think they realise what a nightmare they are creating, not just for taxpayers who have dealt in crypto, but for themselves when it comes to trying to audit the mess that will result.
The notion that you can "download your transaction history" is quaint, and might be fine if you've stuck to one of the mainstream exchanges, but what if you used Shapeshift, where no account is required to exchange between currencies and therefore there is no history to download? What about the foreign exchanges that don't keep complete transaction histories? What about those exchanges that disappeared in the last year?
Crypto should be subject to the same rules as any investment where the onus for record keeping is on the individual and being that there are viable solutions available saying its jsut too complex so I shouldn't have to fulfill my tax obligations shouldn't cut it.
I agree to a point. People should meet their tax obligations, but where I think we differ is in our opinion of how crypto should be treated. Some people, like yourself, seem to think cryptocurrencies are analagous to shares. While, superficially, there may be some similarities, there are some important differences, and, in my opinion, crypto is an entirely new kind of asset class which requires it own rules. Firstly, when shares are traded there is a notional, if not an actual, liquidation to a fiat currency that is then used to purchase the shares being exchanged to. With a crypto-to-crypto exchange that is generally not the case. If one uses Shapeshift, for example, to convert cryptocurrencies there is no reference to fiat at all. Secondly, whilst the ATO may regard cryptocurrencies as a CGT asset, they are *used* like a currency. So, exchanging one crypto for another is much like putting a $20 note in a change machine and receiving ten $2 coins.
If you exchange $1000 of Crypto A for $1000 of Crypto B you still have $1000 of crypto at the end of the transaction. So what exactly is the gain? If the ATO are going to treat a crypto-to-crypto transaction as a CGT event, then they had better explain WHY.
I rather like CryptoMess's analogy of Shroedinger's Cat in that crypto has no definite value until it is cashed out or exchanged for another asset type that links its value to fiat. It would be far simpler, and better, to treat all cryptocurrencies as one asset (the "CryptoSphere" if you like) and CGT events are only triggered when exchanging out of the CryptoSphere. I'm pretty sure that would be embraced by the crypto community and, dare I say it, would probably substantially increase the revenue to the ATO, as the alternative is only going to encourage non-compliance.
If you make a trade and fail to put aside the provision for tax on that trade, that's simply a bad investment decison. If someone buys shares makes a huge profit and reinvests that profit and the share market retracts and they do not have the funds to pay the tax from their CGT profit they are responsible for putting themselves in that position crypto is no different ...people need to start planning ahead not trying to make a poor me argument because their cicumstances aren't how they envisioned
It's very easy for you to say that, but the majority of cryptocurrency users are not sophisticated investors/traders, and many would have never done any form of investment before, and some are probably not even aware that what they have been doing is "investing/trading" in the eyes of the ATO. And why would they be? As I noted above, cryptocurrencies are *used* as currencies.
Are you going to tell a 20 year old University student who purchased a couple of hundred dollars of crypto to play around with and then Shapeshifted it after it had increased 100-fold in value (which they may not have even be aware of) that they now owe the ATO thousands of dollars, even if the value collapsed after the financial year and they have nothing to show for it or pay the tax bill, and that it's all their fault?