Tax reforms and regulations some good, some bad

in LeoFinance2 months ago (edited)

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Taxes, it feels like a dirty word these days and it's something no one likes paying, but they're a necessary evil. I think as block chains advance more and more of this is being realised by a new generation.

Regulations are also a thing that is starting to emerge because without them things fall apart.

Like many, I once also perceived taxes and regulations as bad and red tape to success. Make no mistake they can be if not implemented correctly. Too much regulations and it negates growth, too high taxes and it crumbles and cripples an industry.

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For a period of time Australia was pretty good when it came to tax and cryptocurrancy allowing its citizens to take the plunge and only claiming tax on certain actions.

But this year Australia has negated that move and has implemented some tax reforms that don't fit the sector. Also including defi and staking tokens in taxable income with a few odd occurrences. If you Mine bitcoin and manage to mine .5 of a bitcoin you pay income tax. Say it is valued at $500 you pay the income tax bracket of it. But if you hold it and it increases to $600 and sell you are than taxed CGT on the $100 profit.

To me that is double dipping and I am not sure how something can be both an income and a CGT. But that is the new rule.

I also pulled my data preparing for my tax return, I know I've lost about $AUD8000 but my data is recording a capital gain of $1000. That is because each taxable event as calculated at point of purchase and sale not current.

To me, this is a little bit of an over reach, if my current HODL increases in the next financial year and I sell I then have to pay tax on the same thing AGAIN. I think in Australia's attempt to regulate Cryptocurrancy they have broken it. You can read abit more about it Here

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In another alarming admission, the Australian Taxation Department has been monitoring exchanges. Where the US also focuses on regulations for exchanges and their tax arrangements it appears Australia has no want to focus the same thing, but rather it's citizens.

The ATO has reported that over 600,000 Australians have dabbled in cryptocurrancy since 2020 and as such moved to regulate its citizens by working with exchanges to track, store and provide information to the government.

Oh yeah, that's right. Exchanges have no legal grounds to comply or not comply because they are unregulated so privacy laws do not extend to you when using an exchange. You're personal information is at risk.

Australia appears to have moved right into this and made all exchanges register every single Australian that uses their services so that the ATO can track and monitor their financial movements.

The ATO will also this year be sending out and enforcing Taxation with this year's financial statements. You can read a little more about this year's ATO focus Here

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I think that Australia has a bit of ironing out of their block chain tax policies as blanket policies like this tend to over complicate things. Australia has all block chains as an asset and even though NFTS are art work and a product they are also included in the same blanket tax.

If I buy a picture I pay GST and tax on that purchase, if I sell it GST applies but I am not then taxed 50%. Bit of a cash grab.

But I can't blame our federal gov, we're in an economic crisis and they perceive cryptocurrancy as a means to grab some more cash back. Government agencies experience the same FOMO as everyone else. With big budget holes created by COVID all things will be targeted. Death and tax's are the only thing one can be guaranteed in life.

American Changes

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I think there is some really good discussions occurring in America lately in how cryptocurrancy will be taxed and monitored.

There is always a cost to monitor and at a policy and governance level you need to weight up the costs of investigating, bringing cases to court and enforcement.

Small amounts of money aren't worth it, with no data on the average spend on tokens and the average increase it's hard to put a finger on how to monitor it.

America currently drafting new legislation to follow a similar path as Australia.


Out lined in the American Families Tax Plan America is going to be rolling out similar changes and incorporating a mandatory reporting of deposits, sales, trades, withdrawals of $US10,000.

So in summary, every trade at $US10,000 or above will require mandatory reporting. The main focus is on centralised exchanges and quite easily to enact. I'd say Australia is already doing this but our limits are around $5000.


These changes aren't brought about because everyday Americans are trading on exchanges, oh no. Quite the opposite. America for some time has been unable to adequately investigate and enforce taxes on big income earners. Due to complex business structures, tax evasion and many other barriers.

According to IRS data misreporting which is just a nice way of saying Tax Evasion a significant portion of misreporting is occurring at the higher end and has increased significantly.

300 of the worst offenders got away with not paying $10Billion in tax. That's huge! Especially at a time when the World needs money to be circulating and being spent.

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With the likes of Elon Musk and many other high profile investors pumping in Billions it's safe to say that the IRS has raised it's eye brows. Especially when one person has enough assets to boom and bust a market. Multiple times. Doing so is damaging to thousands of mum and dad investors. Implementing a tax at every sale is a regulation that if enforced slows down this occurring as often.

You're not going to buy $1Billlion sell $1 billion and then do it again repeatedly if each time you're getting slapped with a tax bill. You end up with 0 and the government with all of it. This helps stabilise the market.

The thing with Block Chain tech is that it has given the IRS a weapon. Public ledgers are all open for anyone to see. All the IRS has to do is match it to your entry and exit point and they can publicly track every single transaction. Block Chains greatest asset is the governments greatest tool.

Now all this sounds bad, but it is also good. These changes means governments are going to take cryptocurrancy seriously and no doubt we can soon expect to see a world where we can purchase and use cryptocurrancy. A more stable economy and a move away from rug pulls which will no doubt come with heavy jail terms. All legders are trackable including rug pulls. They're probably the easiest.

People might be thinking DEXs are a way around it and for the mean time they are. But that is an easy regulation to fix. Token holders of DEXs are it's owners, government just needs to make the regulation and if ignored there are alot of people that can be held accountable. Destroying the DEX or forcing it to change.

I'm pretty excited about these changes, this means there will maybe be a massive dump which will cause a price correction and all that hyper inflation will disappear as people exit cryptocurrancy.

The market might stabilise and move towards a more secure service with a limited amount of Pump and Dumps.

There are still many barriers to this due to international law but with a primary focus on users this can be easily achieved.

What are your thoughts?

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I think as long as money remains cheap, regulations will have minimal impact on crypto. The money has to go somewhere whether it is houses, gold/silver or crypto. It will be interesting to see how central banks try to suck up this liquidity. Money is becoming just a few digits on the screen and not tied to anything tangible.

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The monitoring of stuff only gets worst over time. They might start tracking 10k purchases now but they might decrease that to 5k in a few years.

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