What are the taxable events in share market and crypto market?

quanticism on 24/08/2020 - 22:29

If I own 100 shares in company X and sold them all at a higher price than initially purchased, does that mean I need to report a CGT on all those shares? Even if minutes/days after the sell, all (or some) of the liquidated money is immediately reinvested back into company X shares (or another company)?

So if the shares were sold for a total profit of $1000 but all the money including the profit was immediately used to buy back 100 shares of company X, tax will still need to be paid even though my overall position didn't change?

Similarly, with cryptocurrencies, do people on calculate the CGT by 1) Checking how much money got converted from $AUD to a crypto. 2) Checking how much money got converted from a crypto to $AUD. Or does the tax also need to somehow take into account any crypto/crypto (e.g. BTC to ETH) conversions that happened on the broker?

This is all under the assumption that I am just a normal investor and don't have any benefits(?) that a self-employed day trader might have.

Financial

Comments

  • plmko on 24/08/2020 - 22:33
    +3

    Yes

  • inventel on 24/08/2020 - 22:35
    +2

    Yes. If you sell, you will have a CGT event. It doesn't matter that you re-buy them. If you sell at a loss and immediately re-buy, you may be performing a "wash sale", and want to look out for that.

  • JimmyF on 24/08/2020 - 22:39
    +2

    If I own 100 shares in company X and sold them all at a higher price than initially purchased, does that mean I need to report a CGT on all those shares?

    Yes

    Even if minutes/days after the sell,

    Yes

    all (or some) of the liquidated money is immediately reinvested back into company X shares (or another company)?

    Still Yes, you 'made' money, and reinvesting is the same as buy them in the first place again.

    So if the shares were sold for a total profit of $1000 but all the money including the profit was immediately used to buy back 100 shares of company X

    You pay CGT on the $1000 (100% if owned under 12 months, 50% if owned over 12 months)

    Buying shares back again even if using the 'profits', is still buying shares, and is the starting point for working out the CGT when you sell again.

    This is all under the assumption that I am just a normal investor and don't have any benefits(?) that a self-employed day trader might have.

    Doesn't matter who you are, CGT applies to profits, if owned less than 12 months, then 100% is classed as taxable, if owned over 12 months, then only 50% of the profit is classed as taxable.

    You can factor in losses too to offset CGT

    • quanticism on 24/08/2020 - 22:45
      +2

      Thanks, and it looks like crypto/crypto transactions are also CGT events according to: https://www.ato.gov.au/general/gen/tax-treatment-of-crypto-c…

      I'm somewhat surprised by the latter since that makes record keeping extremely difficult (finding the fiat value of a crypto at the time of sale) but the rest makes sense.

      • lunchbox99 on 24/08/2020 - 23:04

        Umm "fiat value", or "value" as it's normally known, is the dollars you spent/are given when you bought and sold them.

        I mean is this a real question?

        Dollars you sold them for minus the dollars you bought them for. If the number is positive you have to pay tax on it - at your marginal tax rate if held for less than 12 months, or 50% of your marginal rate if held longer. If the number is negative, you can claim a tax loss.

        • quanticism on 24/08/2020 - 23:11

          I was referring to a crypto-crypto transaction also being a taxable event, not just crypto-fiat. So if I owned 10 BTC and traded 1 BTC for 10 ETH, it still counts as a taxable event despite the transaction happening without fiat currencies involved.

          Almost like saying if I traded an orange for an apple, that's a taxable event where I have to find the fiat price I used to buy that orange initially and the market fiat price of the orange at the time I traded it for an apple.

          That seems ridiculous at first glance but I imagine there's some kind of reason that rule is in place. It's probably related to why shares of different companies can't be directly traded with each other. They must first be sold into fiat before being converted back into a different share. By applying the same rule to crypto-crypto transactions, they imply that you first converted the crypto to fiat before using it to buy the other crypto despite the middle step being completely skipped.

          • lunchbox99 on 24/08/2020 - 23:37

            @quanticism: Oh sorry, I thought you meant just buying and selling crypto. My bad.

      • Mechz on 24/08/2020 - 23:12

        You sound like you're fishing for ambiguous answers in order to avoid paying tax. It's quite simple. If you sell crypto for more than you paid for it, it's a CGT event. The ATO will catch up with you if you don't declare it.

      • [Deactivated] on 25/08/2020 - 04:24
        +1

        It's a CGT event because they're regarded the same as shares because otherwise everyone will just make share/asset backed Crypto currencies and avoid CGT.

        It's only really currencies that have a special status with regards to CGT, and that's basically a special status due to the fact that only governments/groups of governments make them.

        (And other carve outs like your PPOR etc).

      • moph on 25/08/2020 - 11:05
        +3

        Yes. I had the same questions a couple of years back when I did my tax after doing some crypto trading. I was pretty annoyed about the fact I had to track down a couple of hundred transactions across 4-5 different exchanges to figure out how much I had 'gained', when I had not cashed out a single Australian dollar. I ended up paying for a cointracking acount which made it a lot easier although it was still some work to get all the transactions ironed out particularly when it came to ICOs. https://cointracking.info/

        Now I just keep a spreadsheet and every time I make a trade I record the relative value in AUD. Takes a bit of discipline but really makes life easier at tax time.

        My accountant explained the reasoning - if you made $500k on some shares, and rather than selling them on the share market, you just swapped them with someone directly for a house, the ATO would consider that an asset disposal event and expect you to pay CGT on the gain you made based on the current market value of the assets involved, even though you never directly received AUD for the shares. Otherwise, everyone who had made a capital gain of some kind would just 'trade' that asset for another asset without cashing it out to AUD in the meantime. They see crypto-crypto trades as the same thing.

    • dcep on 25/08/2020 - 14:20

      how many years can you carry over the losses ?

      and, DRP is an ass to track over long term, making investment so hard for one

  • A2E2 on 25/08/2020 - 12:01

    How about making profit/loss in futures markets such as BitMex?
    I assume they are not capital gain/loss and as such any profit/loss can be added to/deducted from your taxable income.

  • brad1-8tsi on 26/08/2020 - 19:56

    yes, the sale triggers a CGT event and the ATO has a record of it and will remind you about it (I don't think they know the amount).

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