Help with Declaring Crypto Losses from an Exploit/Hack?

• 

  Viospeed on 22/07/2024 - 01:45

  +5

  The capital loss will depend if there was a disposable event or if the tokens are still in your possession.

  When your shit coin went from $250 to basically nothing is not a taxable event. When you were "compensated" new tokens and you took possession of these tokens this is consisered an airdrop and is a taxable event if those tokens had any value. There are a few examples of airdrops on the ATO website and what would be considered a taxable event.

  https://www.ato.gov.au/individuals-and-families/investments-…

  Now the real question is what did you do with the new tokens you had received from the devs? Did they get stolen or did they just go to zero as well?

  • 

    tunzafun001 on 22/07/2024 - 09:38

    -2

    The new token got hacked as well..for even more.

    My analogy. Changed my Aud to BSB at the airport.
    Put the BSB in my Trust Wallet and gave it to the Pancake Swap bank. Then at the Pancake Bank, put it in a term deposit.

    Then someone robbed the bank of all their money. Then sold all their money in one hit, dissolving it to almost no value.

    The. Pancake Bank said they will try and make it back by giving customers a cut of their loan products, and offered us their new money (at cents in the dollar).

    Then someone robbed them again…plus took all their reserves of other currencies they held.

    The company collapsed. They are now just plebs on Buy nothing Facebook marketplace giving out their intellectual property for free.

    • 

      Viospeed on 22/07/2024 - 10:47

      +3

      Why are you speaking with analogies? I'm simply asking you if the compensation token they gave you are in your possession or did someone else have custody of it when they were hacked for the second time?

      • 

        tunzafun001 on 22/07/2024 - 22:36

        Sorry, just trying to give you my understanding of what has happened…as I have no idea how this translate into mainstream finance.

        They say every exchange of currency is a taxable event….but tax on what? Ie. Its like going to Europe and changing some aussie dollars to Euros. Tax is where now?

        Then if this happened in the shares world, the company would be immediately placed in a trading halt. But crypto just keeps going indefinitely.. except I believe they canned compensation token

  • 

    aragornelessar on 22/07/2024 - 10:59

    +2

    The capital loss will depend if there was a disposable event or if the tokens are still in your possession.

    I agree with this… my understanding is that if you still have the coins in your possession then it's not a taxable event.

    So going back to your info OP -

    and it went from $250 a token, to basically nothing.

    This is the same as shares going from $250 to nothing. If you still own the shares you haven't made a capital loss yet. When you sell/dispose of them is when you incur that gain/loss.

    The ATO reference on CGT and similar investments.

    https://www.ato.gov.au/individuals-and-families/investments-…

    You can only claim a loss for shares or units you have disposed of. You cannot claim a 'paper loss' on investments you continue to hold.

    If you have sold/disposed of them then you can claim the loss in value from when your purchase cost less your disposal cost.

    • 

      tunzafun001 on 22/07/2024 - 22:42

      Yeah, I agree. But I don't think this scenario has/ could happen in shares. Ie. You lose all your shares, and something else given..then that gets knocked off.

      I don't hold anything anymore..

      How to prove I ever held them ?(I think if I can put my wallet address on BSB scan..I think that's what it's called, and it should show transactions).

      Where they went ..no idea.

      This is the point I realised the Crypto market is a long way from going mainstream..and never touched it again. Now need to remember how it all works. Wonder if my old phone with Trust Wallet even works.

      • 

        aragornelessar on 22/07/2024 - 22:53

        You lose all your shares, and something else given

        I'd imagine this is two different transactions then… but I'm not an accountant.

        The first is the loss of your asset - @AngoraFish below links to what the ATO says to claim that loss.

        The second transaction is you receiving an airdrop of another coin. I'm sure the ATO has a link on treatments of airdrops too. But your best bet is probably an accountant thats across the crypto space - or you could try those Koinly/CryptoTaxCalculator sites or perhaps they have forums too

        • 

          tunzafun001 on 22/07/2024 - 23:57

          @aragornelessar: Any idea if you can just terminate your entire wallet somehow?

        • 

          AngoraFish on 23/07/2024 - 12:45

          @aragornelessar: An airdrop needs to be declared as income in the financial year that it is received, which OP clearly didn't.

          At best, the way it would have worked is that OP declares the airdrop as income and pays tax on the proceeds, and then when it was stolen OP sets that loss aside as a tax deduction to offset against actual future capital gains.

          Or more accurately, OP realises the capital loss on the stolen original cryptocoin, writes that loss off against the nominal gain from the airdop, then when the airdrop is lost again the value of the airdrop (which OP has already paid tax on) is then carried forward as a loss that OP can set aside against future capital gains. But there ain't nobody got the time for that shit.

          Ultimately, however, OP got the airdrop for free and then lost it, resulting is no capital gain and no capital loss, meaning that in any practical sense there are no taxation implications either way. The compensation token is just a distraction.

          • 

            tunzafun001 on 23/07/2024 - 17:13

            @AngoraFish: Hmm… so the compensation offer is an 'airdop', at that time was maybe worth $80. That is pure income in the ATOs eyes (even though it is a compensation/ replacement offer)?
            Then the next two events are cpt losses. So technically I may have paid $80 for a future cpt loss amount.

            Ie. Loss one $1500…Air drop $80…loss 2 $80.

            So Capital loss of $1580 on a $1500 investment, plus $80 of income, My evidence will be a basic BSC scan print out.
            All transactions are there, so that's the evidence.

            Can I just burn the wallet address somehow? More than happy to do so.

            • 

              AngoraFish on 23/07/2024 - 18:41

              @tunzafun001: Loss one is only 1500 if you paid 1500 for it. If you paid 500 for it and it appreciated to 1500 and then it was stolen, however, your loss there is still only 500.

              But assuming a 1500 purchase price and a 80 airdrop value, then yes, your loss might theoretically be 1580. Although as I said, an audit may pick up that you didn't declare the airdrop as income at the time that you received it, which might make the ATO start poking around in earlier year's tax returns.

              Personally, I don't think that trying to claim the airdrop is worth the effort and risk of triggering another audit and more questions for what's in practice around $30 in tax that no longer needs to be paid, that will be offset by $30 in tax that you didn't pay when you should have done in an earlier tax year, so your net tax benefit remains zero. I'd just treat the airdrop value as zero because it cost you nothing and it's still worth nothing to you.

              I can't comment on what benefit you might get from burning the wallet address. There's nowhere near enough information here to even start speculating.

• 

  AngoraFish on 22/07/2024 - 06:55

  +2

  The compensation coin is worth nothing, so you can give up on that one now. You essentially got it for free and then lost it, so the ATO will treat that as a capital gain/loss of zero.

  Your capital loss for the original crypto coin will be the original purchase price. The loss is not what the asset was worth at the time that you lost it.

  So, your proof would be the original purchase receipt or transaction report (likely an email or statement confirming the purchase, date and price, plus if the purchase was not in AUD you will need to also provide a bank statement confirming the exchange rate you paid at the time).

  You then need to provide "acceptable evidence" that the asset is genuinely lost. A police report might suffice, otherwise any written documentation you have, presumably the same documentation you used to know that the crypto coin is now worthless yourself. If you are using a crypto exchange recognised by the ATO then a transaction report showing the coin leaving your account would be a good start, otherwise you'll have to print out everything you have and make sure you're reasonably confident that an accountant could follow the dots.

  See also https://www.ato.gov.au/individuals-and-families/investments-…

  I know nothing about Pancake Bunny, but if it's a lol-coin then the ATO may not accept it at all.

  Finally, for a capital loss to be of any value to you it needs to offset a capital gain elsewhere. If your only income last year was from a wage, bank interest and/or dividends then you're out of luck, you can't deduct it against your regular income at all.

  • 

    tunzafun001 on 22/07/2024 - 09:29

    Cheers for the info. PCB was a Binance award winning token in the up coming Binance Smart Chain back then. Got up to around $650 per token!

    This was my journey…

    My purchase was via Bank transfer (AUD) to Binance Exchange for BSB. Then transfer to Trust Wallet. Then bought (I think) Pancake Bunny via Pancake swap. So Aud ->BSB ->PCB.
    Then the PCB was yield farmed. The farm was hacked and PCB stolen. The Devs offered something called Mound..pretty sure that arrived in Trust Wallet..I then placed that back in their yield farm ..and that was hacked..
    Pancake Bunny is now gone. Never looked at it since.

    Still lost?

    • 

      AngoraFish on 22/07/2024 - 10:55

      +1

      What you need is a paper trail for all that complying with the requirements spelled out here https://www.ato.gov.au/individuals-and-families/investments-…

      My guess is that you don't, and therefore you're out of luck. If you do have that paper trail, however, then you've passed Step 1 and can move on to Step 2.

      Step 2 is that you still need to have made sufficient capital gains elsewhere (eg from cashing out shares) to deduct the loss against - you can't just claim a capital loss on your tax like you might a set of work boots or sunscreen.

      • 

        pjetson on 22/07/2024 - 14:02

        But you can carry forward capital losses.

        • 

          tunzafun001 on 22/07/2024 - 22:45

          @pjetson: Yeah that's right…losses roll over in definitely (until you make a gain).

        • 

          AngoraFish on 23/07/2024 - 00:13

          @pjetson: OP explicitly explains that they would like to claim the losses now.

          If they want to claim the losses now they also have to have gains now (ie in FY23/24).

          In any case, OP understands the game, it seems, so nothing to see here, move along, move along…

      • 

        tunzafun001 on 22/07/2024 - 22:45

        Crypto world has a paper trail..each transaction is traceable on BSC Scan. So should be able to prove x token was acquired…but no idea what a multiple hack will look like on a wallet scan?

        Any hints on what I'm looking for would be great?

• 

  Duckie2hh on 22/07/2024 - 09:42

  +3

  Never made a cent in Crypto

  ouch

  • 

    tunzafun001 on 22/07/2024 - 22:59

    Yeah, lost job in 2020. Ran simulations for 8 months. Went excellent..Had a small crack in 2021..got flogged..don't think the market has been as high ever again. Even BTC is just higher…was around $85k back then.

    Realised the tax structure of crypto dictates it's a government initiative. Its a tax making Mecha.

    (ie. you place $1000 in a yield farm (already likely 2 taxable events to get in) at say $100 each coin at 100% pa.
    You then need to pay tax (in Aud ..not the actual coin you made the gain in). So that's a $1000 taxable event But a year later ..since the coin is a yield coin (and therefore diluting supply) it's now worth $50 each. So you now own twice the amount, but the same value.. but a tax bill for almost the full value…even though you made no gain whatsoever.

    The only real option is BTC as a storage of wealth…but if it ever has one single hack/ manipulation (and mining is becoming more and more in the hands of a few) ..then it's worthless.

• 

  AustriaBargain on 22/07/2024 - 09:48

  In simple form, I had $1500 in Pancake Bunny. Overnight someone did some flash loan/ expolit, and it went from $250 a token, to basically nothing.
  The Devs swapped the P Bunny to a new 'compensation' token….and that got hacked as well.

  That's the simple form?

• 

  87percent on 22/07/2024 - 10:16

  +1

  Damn.. that’s actually really funny

  • 

    Viospeed on 22/07/2024 - 10:32

    Yeah people thinking they're going to get rich buying random shit coins shilled by an exchange or a Youtuber getting kickbacks always makes me laugh. People are too gullable and naive.

    If he just bought BTC in 2022 and HODL'd he would have doubled his money. My average BTC buy in price is $13k. I'm literally AFKing and almost 10x my initial investment.

    • 

      DingoBilly on 22/07/2024 - 10:35

      +3

      Ooof - gotta love the irony of the person calling out crypto shitcoin buyers for being gullible and naive and then advocating for BTC which has the exact same inherent value as that shitcoin lol.

      • 

        Viospeed on 22/07/2024 - 10:40

        Except BTC has 15 years of proven track record and is only going up in price each cycle while fiat is being printed into oblivion.

      • 

        tunzafun001 on 22/07/2024 - 23:42

        Good warning to anyone..

        Check out the first year…lots of media on this great up coming lending / staking protocol… Binance put a few million into it . blah blah…safe as houses..blah blah…then you zoom out.

        https://coinmarketcap.com/currencies/pancakebunny/

    • 

      Cave Fire on 22/07/2024 - 12:20

      Happened to me. Moving from shares, you see large % changes and think you can get in on that. There are also networks of shillers and scam projects. Buying the top ten - twenty is safe

    • 

      tunzafun001 on 22/07/2024 - 23:30

      Wasnt a shit coin back then. Multi million dollar award winner on the Binance Smart Chain. No doubt one of the Devs are involved in it's demise.

      As for BTC, it was around $85k back then. Hasn't gone much higher since. I did the whole diversify thing. Gave it a crack..lost on that one.

      Put the same <$2k into some medical shares, and they are now 10x. Same ,<$2k into mining shares.and they collapsed. I do tend to put the kiss of death on companies!

      But that's the game. But realised the BS.for taxation in crypto is too hard.

      The mining company sent out a letter to my letter box saying the company is worth zero… Done!

      • 

        AngoraFish on 23/07/2024 - 00:21

        Sadly, you're even more screwed on the mining company.

        Unless the company has actually gone bankrupt you need to be able on-sell those shares to someone else before you can realise those losses. Otherwise you're still just sitting on shares worth $0, which isn't a CGT event.

• 

  fishball on 22/07/2024 - 10:36

  +1

  Plug your wallet address into BSCScan and then look at the list of transactions would be a good way to prove it.

  A couple news articles about pancakebunny going to zero would also help

  • 

    tunzafun001 on 22/07/2024 - 23:38

    Cheers mate. I just go here

    https://bscscan.com/

    And I should be able to find my wallet address from Trust Wallet yeah?

    Pancake Bunny token is still trading at 0.06c or similar. But I had my tokens in the yield farm at the time. They never gave them back. But they somehow sent a compensation token to my wallet called Mound, and then offered to provide all proceeds from their lending arm as compensation for 12 months if you staked the Mound..I did this…and left it. Several months later I read Mound was stolen. At this point ..I was out.

    Wonder if I can just terminate my Trust Wallet somehow?
    So it's an undisputed loss of funds.

• 

  trapper on 22/07/2024 - 13:14

  +1

  Tell us about the audit. What happened to trigger this?

  • 

    tunzafun001 on 22/07/2024 - 23:53

    Good question..couple of possibilities. But all would be speculation. Nothing crypto related. I only put $2k in that over 6 months.
    Most like my shit storm of events… Mining shares collapse, property in mining town collapse (all of a sudden zero rental income but still a mortgage to pay). Then crypto collapse.
    FYI. The worst part of the audit has been how many receipts fade. Scan everything in the year you lodge. Then back it up.

    Second to this, since buying everything with giftcards, the usual back up trail is missing (ie credit card statements). So second tip- print and scan all your giftcard purchases..

    • 

      Viospeed on 23/07/2024 - 01:23

      We don't really need "pro tips" as it's just common sense.

      It sounds to me like you were trying to claim tax deductions on things you didn't have a receipt for. Have you been using a tax agent to lodge your tax returns or have you been doing them yourself?

      What were you buying with your "giftcard purchases"? Surely you would know the ATO would want proof of purchase of things you're trying to claim?

      TBH I'm not surprised they're auditing you as you don't seem to know basic tax laws and you're also being evasive about what you've done with the "compensation tokens". You never specified if you're still in possession of those tokens or not. The "Pancake Bank" being hacked doesn't confirm what happened to the airdropped tokens.

      • 

        tunzafun001 on 23/07/2024 - 11:31

        Hmm…a lot in that above. Making assumptions for everyone above (if it helps one other person, good stuff…this is a forum), Im just trying to pass on my wisdom from going through an Audit.

        But yes..have an accountant. I kept all my receipts..however, never considered the receipts would fade. They aren't faded beyond being able to read them completely, but beyond the scanners ability to pick them up. An audit isn't a sit down with an auditor process. Its a scan and send in thing. Can /will take it to court if it comes down to readability of the substantiation (but what a pain).
        But, where I used a credit card, I can easily use that to cross reference the transaction. Funny thing is, the ATO have some options for some things around faded receipts (Ie fuel, you can just use the average usage for your car). I keep thousands of these receipts…didn't need to.

        As for tokens, being evasive…or just dont know what happened to them (as per the entire reason for this post!). All I know is they aren't in my wallet and the yield farm is gone. Again, any help would be appreciated? I think BSC scan holds the key..if I can interpret, work out how to use it. Guessing my tokens will sitting in someone else's wallet?

        Back to using a debit giftcard for purchases that dont attract points (classic ozbargain move), has meant I don't have this credit card backup, and possibly naively only kept my receipts. I'd advise printing the giftcard balance summary after making the transaction. Not entirely sure if that will even cut it, as how do they know you paid for the giftcard. We will see.

        Summary, just keeping your receipts isn't enough. Be cautious using Mastercard gift cards.

        • 

          aragornelessar on 23/07/2024 - 12:38

          @tunzafun001:

          All I know is they aren't in my wallet and the yield farm is gone. Again, any help would be appreciated? I think BSC scan holds the key..if I can interpret, work out how to use it. Guessing my tokens will sitting in someone else's wallet?

          In regards to the above, search up your wallet address in BSCScan. Its a ledger and will have all incomings and outgoings to that address (ie your wallet). If you don't have the coins anymore, then there will be a transaction that the coins are disposed. If they're still in your wallet then you still own them - unless you don't have access to the wallet anymore, which is then the lost private key process @AngoraFish posted earlier from the ATO.

• 

  echelon6 on 22/07/2024 - 21:10

  Yeah I made 500k from BTC but I got hacked and now it's all gone I promise, so I don't need to pay any tax.

• 

  tomclancy on 23/07/2024 - 13:32

  Am I the only one who thinks this is a net capital GAIN for the OP? Without specific transactional details being provided this is how I see it:

  [May 2021] OP swaps AU$100 > BSB > PCB > BNB-USDT farm token in a PancakeBunny lending pool. The PancakeBunny lending pools were subject to a flash loan attack which ultimately made the the PCB token, and consequently the farm token, worthless. It wasn't 'stolen'. But OP still has the farm tokens in their wallet, just worth $0. This is not a taxable event - it is unrealised losses. This cannot be declared in a tax return.

  [June 2021] PancakeBunny team airdrop MND token into OP's wallet as a gesture of goodwill at an equivalent value of AU$100. This IS a taxable event - and the OP should declare this as income in their FY21 tax return.

  [July 2021] The flash loan attack happens again, this time on the pBUNNY-ETH lending pool. The public want out and fire sale MND tokens so that they are worthless. From my readong OP's comments I don't think they have sold their MND token yet. Therefore this is not a taxable event - it is unrealised losses. This cannot be declared in a tax return.

  So my take on this is that OP should declare a capital gain of [say] AU$100 in their FY21 tax return. Nothing else

  • 

    tunzafun001 on 23/07/2024 - 17:04

    Hey mate. I appreciate your insight/ help.

    I see what you are saying (and this is why I no longer am interested in crypto), ie lost heaps….yet tax potentially payable.

    But….

    I never saw the Bunny tokens again (I think the Devs burnt the now broken tokens in the farm? No idea what this will look like on BSC scan?). Then the MND tokens did appear in my wallet (So I guess I have a capital loss here of say $1500 Bunny, and replaced with a gain of something like $80 value of the air dropped Mound token). Net $1420 loss. Looks like you are saying Airdrops are income (even if compensationary)? Ie, not your usual 'dividend' style airdrop?

    My understanding was hack 2 made off with all their MND tokens being held in the pool mine (they found some exploit where they didn't have to give any ETH to get the MND out). Mine are gone, there is nothing in my wallet? (loss event 2).

    Not everyone had their Pancake Bunny or Mound in the pools. So there are still some floating around at like 0.002 cents. But I've got physically no tokens anymore in my wallet. They are gone… I dont even have 0.002 cents worth.

    Lastly this bit from the article

    "Despite efforts to recover, PancakeBunny ultimately dissolved, transforming into a decentralized autonomous organization (DAO)"

    Don't really know what this means?

    But the pools where you used to attach your wallet to move Bunny or MND tokens in/ out are gone.

    In my mind, and I declared a total capital loss, net of all events by June 30 that year.

    Cheers for your help

    • 

      tomclancy on 23/07/2024 - 22:00

      The devil is going to be in the details, that's for sure. I'm not a specialist by any means so if I were you I'd get a Koinly report & do a tonne of research into the specifics of the Bunny burning and MND theft. Document what you can. You can even ask the ATO yourself on their community forum and get their take on it.

      PancakeBunny ultimately dissolved, transforming into a decentralized autonomous organization (DAO)"

      All crypto buzzwords - don't really mean anything. Ultimately, if the token still exists it will exist forever into perpetuity (unlike shares where there is a special ATO ruling that says once they are delisted then you can claim a capital loss). So I would think the answer will lie with who the token holder is today.

      I mean, I get it… if you honestly don't know where your tokens are, how to access them, where to sell them, and have no intention of ever selling them for another, then you've practically lost that money on a permanent basis. On a practical basis that's a capital loss.