Edited version of private advice

Authorisation Number: 1051843718359

Date of advice: 4 June 2021

Ruling

Subject: CGT - calculation of gains and losses

Question 1

Can you sum all capital gains and losses for each financial year that you were buying and selling cryptocurrency over the last five financial years (2015-16 to 2019-20 financial years) to obtain one final assessable capital gain amount?

Answer

No.

Question 2

Can you distribute the final assessable capital gain amount over the last five financial years (2015-16 to 2019-20 financial years) in order to minimise taxation as much as possible?

Answer

No.

Question 3

Can you have all interest for any late payment of income tax waived or removed?

Answer

Withdrawn.

This ruling applies for the following periods:

Year ended 30 June 2016

Year ended 30 June 2017

Year ended 30 June 2018

Year ended 30 June 2019

Year ended 30 June 2020

The scheme commenced on:

1 July 2015

Relevant facts and circumstances

You made an initial significant investment into cryptocurrency in the 2015-16 financial year as an investor rather than a crypto trader.

As such you have stated that you are not carrying on a business of buying and selling cryptocurrency.

However, you made a significant loss in the 2015-16 financial year following you selling the majority of your cryptocurrency investments.

In the 2016-17 financial year you made a second significant investment in cryptocurrency. This time, a large capital gain resulted when you sold these cryptocurrency investments in the 2017-18 financial year.

You continued to invest in cryptocurrency in the 2018-19 and 2019-20 financial years, where you experienced significant losses in the 2018-19 financial year, and significant losses in the 2019-20 financial year, which you attribute to the COVID-19 crisis.

You estimate that you bought and sold various cryptocurrencies over 10,000 times between 1 July 2015 and 30 June 2020.

You have used an on- line tool along with a specialised accounting firm to calculate your gains and losses.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 102-5

Income Tax Assessment Act 1997 Section 102-10

Income Tax Assessment Act 1997 Section 102-20

Reasons for decision

Section 102-5 of the Income Tax Assessment Act 1997 (ITAA 1997) contains a five-step method statement for working out a net capital gain for a financial year.

Pursuant to section 102-20 of the ITAA 1997, you can only make a capital gain or loss when a CGT event happens. The gain or loss is made at the time of the CGT event and can only be made in respect of a CGT asset.

As such, it is this net capital gain amount which is included in a taxpayer's assessable income in the year in which the net capital gain is incurred.

There is no discretion in this legislation to allow the Commissioner to treat a net capital gain as being assessable in any other financial year.

In addition, Section 102-10 of the ITAA 1997 contains a separate, three steps method statement for working out a net capital loss.

A net capital loss for an income year arises where all the capital losses made in that income year exceed all the capital gains made in that income year. Where a net capital loss arises, to the extent that a net capital loss cannot be used to offset capital gains in an income year, it can be carried forward to a subsequent income year to be used to offset against any future capital gains.

However, a net capital loss cannot be deducted from a taxpayer's assessable income, nor can it be carried back to prior financial years.

There is also no discretion in this legislation to treat a net capital loss as being assessable in any other financial year.

Application to your circumstances

The net capital gain you made in the 2017-18 financial year is assessable only in that financial year, which is calculated in accordance with the method statement contained in section 102-5 of the ITAA 1997.

There is no discretion which would allow the Commissioner to treat this net capital gain as being assessable in any other financial year, nor to amalgamate all of your net capital gains and losses into one assessable amount (a net capital gain or a net capital loss) in assess them in any particular financial year.

In addition, the net capital losses you made in the 2018-19 and 2019-20 financial years are only claimable in those financial years, and any unutilised loss amounts can only be carried forward to subsequent financial years.

As such those losses cannot be carried back to be offset against the capital gain you made in the 2017-18 financial year.

We understand that the large capital gain you made in the 2017-18 financial year and the subsequent capital losses may leave you in a difficult financial position. However as stated above, the Commissioner does not have any discretion to apply the law any differently to your circumstances.