A resident of Australia paid a whopping $100,000 of tax on Ethereum coins currently worth $20,000, pushing the investor into a net loss from a freak tax event. The rules for taxation of cryptocurrency in Australia are unfair to investors and holders, leading experts to call for reform, as reported by Micky on June 24, 2019.
Exorbitant Tax Event
A shock tax event in Australia has led to a man paying five times the value of his crypto held in tax. The Australian resident is a client of Adrien Forza, director of Crypto Tax Australia. This isn’t the first instance of unjust crypto treatment in Australia, but it just might be the most bizarre outcome seen so far.
The man who was subjected to the $100,000 tax bill had received $250,000 worth of Ethereum in January 2018, when it was trading above $1200. No gain was realized from the coins as they were held as they are, but the Australian tax code for cryptocurrency requires tax to be paid on the value received – not realized.
The event forces the man to essentially pay tax on money he doesn’t have. Australian investors in Ethereum are facing exorbitant tax bills depending on the price of ETH on the date of receipt.
Under Australian tax law, Ethereum Classic is considered to be the original, while Ethereum is considered a spin-off project for which Classic holders receive proportional tokens. Owing to this, Ethereum is considered to have been acquired at $0, meaning investors will pay capital gains tax on the entire amount, no matter when they sell it.
Lack of Clarity Hindering Adoption
Most jurisdictions don’t have clear guidelines on how tax is to be paid in cryptocurrency. The uncertainty has led to restrictions on capital flows into the asset class from institutions, as they require regulatory certainty to deal with assets.
The biggest obstacle for regulatory and tax authorities is finding global common ground. As a universal asset that is easily transferrable to any fiat currency, finding jurisdiction for cryptocurrency is a tricky task. The best bet for tax authorities is to work together to find common ground to make sure crypto investors aren’t flocking to regions like Malta and Gibraltar with lax crypto tax relative to the rest of the world.