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Re: Cryptocurrency: ICO timing question

Initiate

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Replies 5

On 28 Aug 2017 I sent 3 ETH (worth $1,295.20 AUD) to a pre-ICO scheme (and paid 0.000441 ETH worth $0.19 AUD in network fees). The contribution was made for the promise to receive token XYZ for the agreed price of $0.03 USD. The date of distibution was to be announced later.


On 2nd Nov 2017 the ICO opened to public for the sale price of $0.065 USD and it lasted for several days. ETH exchange rate on 2nd Nov 2017 was around 1ETH = 530 AUD. This date is most probably not relevant to my situation; however, I am still mentioning it here just as a fact.

 

Once the ICO closed, every contributer was sent an email and asked to go through the account verification process known as KYC.

 

On 28 Dec 2017 I received 34500 XYZ tokens from the token crowdsale and the exchange rate for ETH on this date was 1 ETH / 941.52 AUD. Thereofe, price for 3 ETH on this date was (3 x $941.52 AUD) = $2,824.56 AUD (and 0.000441 ETH fee was worth $0.42 AUD)

 

Obviously, I disposed 3 ETH in order to acquire XYZ tokens. However, considering the huge ETH price fluctuations between 28 Aug 2017 (= date I sent ETH to the crowdsale) and 28 Dec 2017 (= date I received XYZ tokens), I wonder what the correct timing would have been with regards to the disposal of ETH in order to acquire XYZ tokens. So, would it be correct to state the below?

 

  • 3 ETH disposed on 28 Aug 2017 for the price of $1,295.20 AUD (plus network fee of $0.19 AUD)
  • 34500 XYZ tokens acquired on 28 Dec 2017 for the price of $1,295.20 AUD + $0.19 AUD = $1295.39 AUD

 

If the above is correct, then my 2017-2018 tax return was not done correctly because in my return of that year I stated 34500 XYZ was acquired in exchange for disposal of 3 ETH on 28 Dec 2017, or equivalently:

 

  • 3 ETH disposed on 28 Dec 2017 for the price of $2,824.56 AUD (and 0.000441 ETH / $0.42 AUD paid for fee)
  • 34500 XYZ tokens acquired for the price of $2,824.56 AUD (+$0.42 AUD)

 

Which one is correct? Should I amend my return of that year?

 

Thanks!

 

 

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Devotee

Replies 3

Hi @Taxpayer123456 

 

You may refer to the ATO link about the timing of CGT event.

 

If we assume ETH is USD, ICO is IPO shares 

 

The transaction was like: you converted AUD to USD, subscribed some international IPO shares in Aug. Shares were issued in Nov.

 

https://www.ato.gov.au/general/capital-gains-tax/selling-an-asset-and-other-cgt-events/types-of-cgt-...

 

5 REPLIES 5

ATO Community Support

Replies 0

Hi @ Taxpayer123456

 

If I have understood you correctly you are asking what makes for a CGT Event. This will determine your selling price and enable your to establish your profit or loss you declare in your return. You are being accessed on the value of the goods when you purchased them and the value when sold. I would be looking at our information at Other CGT Events K and applying it to your transaction.

Most helpful response

Devotee

Replies 3

Hi @Taxpayer123456 

 

You may refer to the ATO link about the timing of CGT event.

 

If we assume ETH is USD, ICO is IPO shares 

 

The transaction was like: you converted AUD to USD, subscribed some international IPO shares in Aug. Shares were issued in Nov.

 

https://www.ato.gov.au/general/capital-gains-tax/selling-an-asset-and-other-cgt-events/types-of-cgt-...

 

Initiate

Replies 2

Hi @MS 

 

I think your answer better relates to my situation, which means that I have to caluclate the captial gains/loss from disposal of ETH in Aug (and not Nov). That's fair enough.

 

Now with that in mind, my question is, what date should I consider to be the date of purchasing the new asset? Aug or Nov?

 

Thanks!

Devotee

Replies 0

Hi @Taxpayer123456,

 

The timing of acquiring the token is when you became the owner of the token. Have you been issued with something similar to a shareholding statment? Check the date on the document. I guess it would be in Nov. or Dec.

 

In an IPO, subscription funds received are held in a trust account until offer period is closed. Shares are only issued after offer closing date, not before.

 

Before shares are issued, subscibers are the owners of the subsciption funds they sent to the IPO company. That's why funds are held in a trust account. 

 

 

 

 

 

 

ATO Community Support

Replies 0

Hi @Taxpayer123456

 

Staking rewards and airdrops discusses tokens and the tax treatment there of and offers examples. You may find it  helpful along with the good insights of @MS.